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Publication 521

Illustrated Example(p13)

Tom and Peggy Smith are married and have two children. They owned a home in Detroit where Tom worked. On February 8, 2013, Tom's employer told him that he would be transferred to San Diego as of April 10 that year. Peggy flew to San Diego on March 1 to look for a new home. She put a down payment of $25,000 on a house being built and returned to Detroit on March 4. The Smiths sold their Detroit home for $1,500 less than they paid for it. They contracted to have their personal effects moved to San Diego on April 3. The family drove to San Diego where they found that their new home was not finished. They stayed in a nearby motel until the house was ready on May 1. On April 10, Tom went to work in the San Diego plant where he still works.
Their records for the move show:
1)Peggy's pre-move househunting
  Travel and lodging $  449  
  Meals 75 $   524
2)Down payment on San Diego
3)Real estate commission paid on
sale of Detroit home
4)Loss on sale of Detroit home (not
including real estate commission)
5)Amount paid for moving personal
effects (furniture, other household
goods, etc.)
6)Expenses of driving to San Diego:  
 Mileage (Start 14,278;
End 16,478)
 2,200 miles at 24 cents a mile
 $  528  
  Lodging 180  
  Meals 320 1,028
7)Cost of temporary living
expenses in San Diego:
  Motel rooms $1,450  
  Meals 2,280 3,730
Tom was reimbursed $10,907 under an accountable plan. His employer gave him the following breakdown of the reimbursement that was allowed under the employer's plan.
Moving personal effects $ 6,800
Travel (and lodging) to San Diego 708
Travel (and lodging) for househunting trip 449
Lodging for temporary quarters 1,450
Loss on sale of home 1,500
Total reimbursement $10,907
The employer included this reimbursement on Tom's Form W-2 for the year. The reimbursement of allowable expenses, $7,508 for moving household goods and travel to San Diego, was included in box 12 of Form W-2. His employer identified this amount with code P.
The employer included the balance, $3,399 reimbursement of nonallowable expenses, in box 1 of Form W-2 with Tom's other wages. Tom must include this amount on Form 1040, line 7. The employer withholds taxes from the $3,399, as discussed under Reimbursement for deductible and nondeductible expenses under Tax Withholding and Estimated Tax, earlier. Also, Tom's employer could have given him a separate Form W-2 for his moving expense reimbursement.
To figure his tax deduction for moving expenses, Tom enters the following amounts on Form 3903.
Item 5 — moving personal effects (line 1) $8,000
Item 6 — driving to San Diego ($528 + $180)
 (line 2)
Total tax deductible moving expenses (line 3) $8,708
Minus: Reimbursement included in box 12
 of Form W-2 (line 4)
Tax deduction for moving expenses (line 5) $1,200
Tom's Form 3903 is shown, later. He also enters his deduction, $1,200, on Form 1040, line 26.

Nondeductible expenses.(p14)

Of the $43,282 expenses that Tom and Peggy incurred, the following items totaling $34,574 ($43,282 – $8,708) cannot be deducted.