Moving Expenses Tax Deduction For Graduating Medical Students / New Residents

[Update May 2018: With the new tax law, the moving expenses deduction has unfortunately been repealed for everyone, including medical students and residents. – WSP]

As they graduate from medical school in the coming months, medical students from around the country will be moving to new locations. Moving can be expensive, especially if you have to move out-of-state or even across the country. Thankfully, some medical students will be able to get a tax deduction for their moving expenses. Before the move, it would helpful to know if you would qualify for a moving expenses tax deduction. This way, you can keep detailed records of your moving expenses and get the maximum deduction.

Like all of my other articles, this blog post should be considered informational in nature only. I am a doctor, not an accountant or financial advisor. Please consult your tax or financial advisor for advice regarding your specific situation.

Who Can Qualify For the Moving Expenses Tax Deduction?

In order to qualify for the moving expenses tax deduction, you need to meet two tests defined by the IRS:

Distance Test

For medical students, who are taking a full-time job after a period of unemployment (or part-time employment), their new main job location (the hospital where they will be doing the majority of your rotations) must be greater than 50 miles from their home during medical school. Many medical students will pass the distance test, but some students who are staying at their home institution or moving to a different part of a major metropolitan area (i.e. Brooklyn to Manhattan) may not qualify.

Time Test

For medical students, they must work full-time for 39 weeks of the first twelve months after they move to their new location. This should not be an issue for most medical residents who will be working (more than) full-time as interns. One exception to watch out for is if you move to your new location more than three months prior to the start of internship. In this case, you may not be able to meet the time test. Another possible exception could be if you took maternity or other leave in the first 9 months of your residency.

What Moving Expenses Can Be Deducted?

The IRS defines moving expenses generally as the “reasonable expenses of moving your household goods and personal effects.” In addition, travel costs (including lodging but not meals) are defined as moving expenses. I would read the IRS document 521 if you have any questions regarding what is defined as “reasonable expenses.” In general, you can’t include expenses that are not directly related to moving from one location to another. Also, stopovers or side trips during your move are not considered moving expenses. For example, if it takes more than a day of driving to reach your destination, then your hotel room would count as moving expenses. However, if you spend three nights in New York during your move from DC to Boston, you would not likely be able to deduct the costs of the hotel nights in New York.

If travelling by car, you can get a deduction for your mileage either by keeping records of your actual expenses (essentially gas), or calculating your mileage at a flat rate of $0.19 a mile. So long as gas prices don’t go through the roof and you don’t have a gas-guzzling vehicle, I would take the flat rate of $0.19 a mile. However, feel free to calculate both options and take the higher of the two deductions.

You can also deduct the moving expenses of any other household member, so long as they lived with you in both your old and new home.

Remember, meals during travel are not included as moving expenses.

Also, you cannot deduct moving expenses that are reimbursed by your hospital. Most medical students don’t have that luxury, so this should not be an issue.

How Much Tax Deduction Can You Receive?

Moving expenses is on line 26 of Form 1040. Therefore, you will receive this deduction even if you take the standard deduction. You do not need to itemize your deductions in order to receive the moving expenses tax deduction.

Remember, moving expenses are a tax deduction, not a tax credit. Your reduction in the amount of taxes you pay (or increase in tax refund) is based on your total moving expenses and your tax bracket. You will need to fill out Form 3903 to claim the moving expenses tax deduction. Most tax software will guide you step-by-step through this process.

Further Reading

1. IRS Tax Topic 455: Moving expenses – A summary of IRS guidance on moving expenses.
2. Can I Deduct My Moving Expenses -An interactive IRS module discussing whether you can deduct your moving expenses
3. IRS Publication 521: Moving Expenses – A detailed document from the IRS regarding moving expenses
4. TurboTax Summary of Moving Expenses Deduction – TurboTax’s breakdown of the Moving Expenses Deduction

The Moving Expenses tax deduction is something every medical student should investigate when moving for residency. If you believe you will qualify for the tax deduction, you should keep all receipts of your moving expenses during your move.

What do you think? Did you take the moving expenses deduction when you moved for residency or another job? How much money did you save on your taxes as a result?