Everybody relishes the opportunity to receive a tax deduction, especially for something as horrendous as moving. However, not every move is tax deductible, so follow our guide before you start shelling out for movers expecting to recoup some of the costs. So, what is a tax deduction anyway? Basically, a tax deduction occurs when there is a reduction of income that is able to be taxed. This commonly happens as a result of expenses, particularly those incurred to produce additional income. The difference between deductions, exemptions and credit is that deductions and exemptions both reduce taxable income, while credits reduce the tax burden. When people move from one location to another and under certain conditions, many of the expenses involved in moving can be tax deductible especially if you the move is job related. Now, before we move forward with our blog; here comes the disclaimer. We are NOT tax experts. This blog is written for the sole purpose of getting you to consider the possibilities. If you are moving, federal tax laws do allow you to deduct your moving expenses if your relocation relates to either starting a new job or transferring to a new location for your present employer. If you visit the IRS website, you can gather more information. Or, better yet, talk to your CPA. According to the IRS website, there are three factors that must be met in order to deduct moving expenses:
Your move closely relates to the start of work
You meet the distance test
You meet the time test
In the meantime, here are some helpful tips for getting started in thinking about this process.
As with any type of business situation, keep your receipts.
Know what kinds of expenses are deductible while you search for your new home, especially if you are planning to bring your family with you.
Consider the cost of hotel rooms, meals and other expenses involved with moving for up to 30 days after you get the new job.
Keep track of the expenses that are included with selling your home and buying a new one.
Again, be sure to consult with a trained accountant so you understand the facets of your situation and ways these tips might apply to you. In the meantime, best of luck with your move. Contributed by James Link