Things to Know About Moving and Taxes
Moving and Taxes both require the same amount of meticulous attention to detail. In previous years, some situations allowed taxpayers to deduct moving expenses when filing tax returns. But it’s a bit more difficult now. Some military moves can still qualify for deductions, but there are requirements that need to be met.
Have you experienced a long distance move this past year? We hope you find this information useful!
Claiming Moving Expenses on Your Taxes
Beginning in 2018, moving expenses are only deductible in certain circumstance by military members. If you experienced a long distance move because of work, you may qualify to use IRS Form 3903 to claim the cost of your moving expenses as a deduction on your federal income tax return.
The requirements include meeting a time, distance and expense qualifications. Review this excerpt below from an article published by Turbo Tax:
Meeting the “time test”
The timing of your move must be closely related to the start of your new employment in order to qualify for the tax deduction. To meet this standard, you’ll have to start your new job and work full-time for at least 39 weeks within the first 12 months after your move.
There is an exception: If you start your new job months before your family moves to the new location because of special circumstances, such as a spouse who is receiving medical care or a child who is finishing school near your old home, you can still deduct your moving expenses despite the fact that your move occurs long after your first day of work.
Meeting the “distance test”
Another requirement involves the distance between your new workplace and your old home. To claim your moving costs, your new place of employment must be at least 50 miles farther away from your old home than your previous place of employment. As an example, if you lived in a home that was 20 miles away from your old job, you’ll have to take a job at a new company that is at least 70 miles away from your old home to qualify for the deduction.
Members of the United States military can claim their moving expenses regardless of the distance or employment requirements if they are making a permanent change in their military status such as retirement or termination of service.
All of the expenses you claim must be both reasonable and necessary to your move. Reasonable moving expenses may include the cost of gas or the mileage on your vehicle, rental trucks, short-term storage, and boxes. For a long move, you might include the cost of lodging at a hotel on the way to your new home.
The IRS allots a standard mileage rate that you can use to calculate your travel expenses, but if you prefer, you can keep up with your actual transportation costs and deduct those instead. Eligible travel costs include gas, oil, parking fees, and tolls.
Did you Move to a State with Different Taxing Requirement?
Though your Federal Tax will not change if you move state to state, your local and state taxes probably will. You may find that you have to file partial returns for each state you lived in for partial years (unless you moved from and to a state without state income taxes). To make things even more convoluted, some states use a progressive income tax system (like the IRS) where earners in higher-earning brackets are calculated to pay more, while other states have a flat tax rate.
You can learn more about income tax in your new location online at this IRS web page.
States with the higher income tax rates:
States with no state income tax:
- South Dakota
Local Property Taxes – Home and Auto
When selling or purchasing a home, the tax burden can vary significantly, and you could possibly see quite a difference in both your property taxes and qualified deductions.
Local real estate taxes are not handled at the state or federal level and can vary from one location to the next. Also, you must consider that average house prices may differ substantially so just looking at the average percentage for the state will not be enough to determine the amount you will owe in taxes.
There may be additional taxes owed on the vehicle you are moving and registering as well. When you register your vehicle in your new location you may be responsible for the difference in the sales tax between your original location and where you moved to if the car was purchased within 6 months of your move. Contact your destination Department of Motor Vehicles Division prior to your move so that you are prepared for the costs and taxes.
Filing Your Taxes When You Move
As we have shown above, a long distance move can complicate your taxes. You may need to file partial returns in both states. If you are moving a business you could run into additional costs. Each move and situation are unique and we strongly suggest that you consult with a tax professional to be sure your taxes are paid correctly and that you can take advantage of any possible deductions.
Remember the Liberty Group Movers When Planning Your Long Distance Move
When you’re looking for a name trust, look to The Liberty Group! With over a century of continuous operation we take our business and your needs very seriously. As dedicated moving service professionals, we also understand the importance of being associated with national moving services companies. That’s why The Liberty Group is a local affiliate for United Van Lines & Mayflower Transit. As one of the moving company leaders in the United States, United Van Lines & Mayflower Transit counts on us to deliver services that meet their own national standards for moving, logistics and storage.