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Relocating for a new job? In
addition to sorting out all those things you stuffed in the
back of your cupboards, wrapping up the crystal, and
figuring out what to do with that yellow naugahyde couch
that you should have tossed the last time you moved,
attempting to sort out the tax implications of your moving
expenses is not the least of your worries. For one, you need
to figure out how to separate your personal expenditures
from deductible moving expenses, and, if your employer is
reimbursing all or a portion of your moving expenses, you
need to figure out how much of the reimbursement is taxable.
While we can’t be there with markers and cardboard boxes, we
can help you with some of the rules relating to work-related
relocations.Generally, the IRS defines moving
expenses as deductible only if they are closely related both in time and
place to when you started work at the new location.
Closely related in time generally means
that all moving expenses you report must be incurred within one year
after the first day you report to your new job. If you can prove that a
move wasn’t possible within the one-year timeframe, the IRS may grant
you an exception.
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In addition, you must meet a second time
test that looks at the amount of time you worked at your new job
location after the move. If you are an employee, you must work full time
for at least 39 weeks during the first 12 months after arriving in the
new general area. If you are self-employed, you must work full time for
a total of at least 78 weeks during the first 24 months after arriving
at the new location. If you take the deduction, then don’t meet the time
requirement, you have to amend the return. Full-time work depends on
what is usual for the type of work you perform.
To meet the closely related in place
requirement, you basically have to prove two things: 1) that your new
home is closer to your new job than your old home was to your new job,
and 2) that your new job location is at least 50 miles farther from your
old home than your previous job was. Seems reasonable, doesn’t it?
When it comes to determining which moving
expenses are deductible, the IRS looks at reasonable costs related to
moving household goods and personal effects, as defined in the Internal
Revenue Code and other regulations. Some deductible moving expenses
include:
The cost of storing and insuring
household goods within any period of 30 consecutive days during the move
The cost of traveling from the old home
to the new home by the most direct route. (Don’t figure on deducting
that antiquing junket to China.) You can use the actual traveling
expense, or the standard mileage rate of 10 cents/mile. Household
members don’t have to travel together or at the same time.
Lodging expenses at the old and new
locations, and while traveling from the old home to the new home
Some expenses aren’t deductible. These
include:
House hunting expenses you incur BEFORE
your move
Temporary living expenses
Expenses incurred in buying or selling a
home
Meal expenses
Under the Internal Revenue Code, gross
income does not include any working condition fringe benefit classified
as a qualified moving expense reimbursement. Reimbursed expenses that
are not otherwise deductible are included in your income.
As you can see, the tax rules for moving
expenses can be as confusing as figuring out where to store that
naugahyde couch you just can’t part with. If you need further
information, contact a professional tax advisor.
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