Moving Day Deductions.
By Doug Davis
Even though moving can be an expensive undertaking there is a little relief from an unexpected source, Uncle Sam. Yes, Uncle Sam. Moving expense deductions are varied and complicated and its best to use a tax accountant that is also a relocation specialist. To take it even further, if you are moving to another state, find a tax accountant that also specializes in multi-state relocation. One good option is to use the specialists ReloTax. They use tax software that specializes in multi-state taxation.
With about 40 million people a year moving, relocating is becoming big business. Corporations are starting to use relocation specialists because of so many rules and regulations. One example is: suppose a new employer gives you $15,000 to move. That $15,000 may be taxable and could be added as gross income.
Here are some examples of expenses that may be deductable but of course ask your specialist as these deductions may vary from state to state:
- The cost of packing, crating and transportation of household goods and personal effects;
- Connecting and disconnecting utilities;
- Cost of shipping automobiles and pets;
- Cost of insuring household goods within any period fo 30 consecutive days after the day your personal items are moved from your old residence and before they are shipped to your new residence;
- Cost of transportation and lodging for yourself and member of your household while traveling from your former residence to your new residence;
Here are just a few examples of non deductable expenses. Again, check with your tax accountant:
- Any part of the purchase price of your new home;
- Car tags;
- Drivers license;
- Home improvements to help sell you old residence;
- Loss on the sale of your home;
- Mortgage penalties;
- Pre-move house hunting expenses;
- Real Estate taxes;
- Security deposits;
In order for your moving expenses to be deductable, your relocation must be related to your job or employment. There are basically two
ways to qualify for the tax deduction; the distance test and the time test. You will need to meet the requirements of these tests for any
expenses to qualify as deductions.
Distance Test: The IRS needs to determine if your new job is more than 50 miles further from your old residence than you old job was.
Time test: If you spend 39 weeks out of the first 52 weeks at your new job as a full time employee, then you pass. For self employed people, you need to spend 78 weeks out of the first two years at your new job.
If you are married and filing a joint return, only one person needs to meet both the time and distance tests to qualify for moving expense deduction. However, you cannot combine employment periods to meet the time worked test.
Also, there are special circumstances that can affect eligibility. For example; The Armed Forces. If you moved because of a permanent change of station, you don't have to meet the distance test. Main Job location: main job location is usually the place where you spend most of your working time. If you don't office out of one place in particular, your main job location is place where your work is centered. Union members: If work for several employers on short term basis and you work under a union hall system, your main job location is the union hall.