Internal Revenue Code section 217 allows all taxpayers to deduct their moving expenses, but only if they are moving for a new job. As described previously, there are additional moving tax breaks for American moving abroad.
Once the taxpayer has moved abroad, Internal Revenue Code section 217(i) provides even more special tax breaks. The taxpayer can deduct his moving expenses for moving back to the United States for retirement, notwithstanding the normal requirement that a tax-deductible move has to be for a new job.
The retirement has to be a "bona fide retirement" under which the taxpayer intends to permanently stop working, but it is okay if the taxpayer ultimately resumes gainful full-time
Furthermore, if someone dies while working abroad, his spouse and dependents can deduct their expenses for moving back to the United States, as long as they move within 6 months of the death. This rule does not apply if someone dies in the United States and their spouse and dependents move afterwards.
In contrast, someone who moves within the United States because of retirement or death of a family member is not allowed to deduct any moving expenses, unless a new job happens to be at the new location.
Section 217 Moving expenses.
(i) Allowance of deductions in case of retirees or
decedents who were working abroad.
(1) In general.
In the case of any qualified retiree moving expenses or qualified survivor
this section (other than subsection (h)) shall be
applied with respect to such expenses as if they were incurred in connection
with the commencement of work by the taxpayer as an employee at a new principal
place of work located within the United States, and
the limitations of subsection (c)(2) [about a new
job] shall not apply.
(2) Qualified retiree moving expenses.
For purposes of paragraph (1), the term “qualified retiree moving expenses”
means any moving expenses—
which are incurred by an individual whose former
principal place of work and former residence were outside the United
which are incurred for a move to a new residence in
the United States in
connection with the bona fide retirement of the individual.
(3) Qualified survivor moving expenses.
For purposes of paragraph (1), the term “qualified survivor moving expenses”
means moving expenses—
which are paid or incurred by the spouse or any
dependent of any decedent who (as of the time of his death) had a principal
place of work outside the United
which are incurred for a move which begins within 6
months after the death of such decedent and which is to a residence in the
United States from a former residence outside the United States which (as of
the time of the decedent's death) was the residence of such decedent and the
individual paying or incurring the expense.