A smart person knows how and when to save money. Especially if you consider moving costs NYC. Luckily, under today’s law regarding taxes and moving you are entitled to a certain tax deduction when you move. But, same as any other government help, there are certain prerequisites you must have in order to be eligible. With that in mind, here are taxable and nontaxable relocation expenses and what you need to do in order to be eligible to claim a tax deduction on them.
Are you eligible?
Before you even start worrying about taxable and nontaxable relocation expenses, you need to figure out if your move is eligible for deduction. There is little gain in knowing which expenses are taxable if you cannot use that information for a tax deduction.
Is your move work related?
The only time when you can consider your move tax deductible is if you are moving because of work. You cannot claim a tax deduction if your move is not work-related. Simple as that. But if it is work-related, you might be eligible for a tax deduction. You can either start a new job or be moving because of your current job.
Do you pass the distance test?
If your move is work-related, you need to pass two tests. The first is the distance test. You will pass the distance test if your new job location is at least 50 miles further from your home then your former job location was. Home in this context is the current home, not the one you are moving to. For instance, if your current job location is 20 miles from your home, your next job location needs to be at least 70 miles from your home. The miles counted are by the shortest route possible. If you meet that condition, congratulations! You have passed the distance test.
Do you pass the time test?
Time test is related to work and it has two categories. If you are an employee, you need to spend at least 39 weeks working in the first year since your arrival. It has to be full-time employment. Do not worry if you get sick or need to be temporarily absent for some other valid reason. The state considers that you have worked full-time during that period. If you employ yourself, you first need to spend 39 weeks working in the first year. Then you have to meet the minimum of spending at least 78 weeks during your first two years of stay. The second condition is there to give you a second chance if you for some reason fail the first condition. You can change your place of business and the type of business. Just stay in the same area.
Taxable moving expenses
Ok, now that you know what you need to do in order to be eligible for tax deduction, its time to go over taxable moving expenses. Keep in mind that if you want something to be considered taxable, you need to provide a paper trail. Paying cash and having no proof of payment simply won’t work. Whatever you try to claim you need to back up with receipts and official statements. What you can consider taxable is the moving of your household items and your personal transport. But, you need to keep some things in mind.
You can only deduct expenses that the state considers reasonable. You need to take the most direct possible route that you can take by standard transport. If you go sightseeing while moving or take a route that is not direct, you will lose the ability to claim a tax deduction.
You can use your car to take you and the people living with you the new living location and claim a tax deduction for it. To figure out expenses you can either save receipts from buying fuel, parking fees and tolls, or you can count the standard mileage which is 17 cents a mile. Any lodging expenses that happen during the move are tax deductible.
Packing, loading, and transporting are all considered taxable. You can only move personal items. The State defines personal items as transportable items that you use regularly. You can also move art with help from reliable fine art movers. Car shipping is also taxable and deductible. Even connection and disconcertion of utilities is taxable and deductible. Just make sure to stay in the “reasonable expenses” range.
Storing your personal goods is considered taxable only if you store them for less than 30 days since the start of your move. When you are ready, you need to make a delivery plan for transporting your things from storage. You need to make sure that the state will consider the delivery plan reasonable.
Expenses that are nontaxable
Some of the things that the United States do not consider taxable regarding relocation are:
- Car tag’s
- Driver’s license
- Any expense regarding buying or selling a home
- Any expense regarding entering or breaking a lease
- Mortgage difficulties and penalties
- Loss of sale
- Security deposit
- Return trips
Moving expense vs business expense
Even if you are eligible for a tax deduction for your move, you might want to do some calculations. Business expenses are also taxable and eligible for tax deduction. But, you cannot claim a tax deduction for both moving and business. Look into different segments and figure out which is best for your situation.
Special circumstances for taxable and nontaxable relocation expenses
There are certain situations in which the state considers taxable and nontaxable relocation expenses a bit differently than previously described. The first one is if the person moving or a member of their household is in the military. The state will provide more benefits and circumstances that normally would not be considered taxable, are. Also, if you are moving to a different country, the taxable and nontaxable relocation expenses change based on the country you are moving into. Make sure that you study up on your particular situation.