Are you considering relocating for work in the near future? If that is the case, we are sure you will want to learn everything you can about tax deduction possibilities. It is really important to point out that even if you have informed yourself about tax deductions for moving expenses before the year of 2017, you will need to do it once again! This is because, in December 2017, Congress has implemented a new moving expenses tax reform. And, this particular reform eliminates the possibility of claiming a tax deduction for the relocation expenses.
Yes, you have read it right… But, don’t start to despair just yet! This tax reform isn’t permanent – it will last only until 2025! This doesn’t mean that we are suggesting to wait for 2026 to relocate for work. That wouldn’t be a good idea since Congress can extend the time limit of this reform or even make it permanent. However, what you can do is learn more about the new tax reform and some exceptions to the new rule. And, this is where we, at Verified Movers, come in!
Since this is such an important matter, we have decided to provide you with the necessary pieces of information about tax deductions that will be of use to you in case you are planning to relocate in the near future. So, if this sounds like something you will want to learn, make sure to keep reading!
What are tax deductions and how do they work?
Tax deductions lower your taxable income and, furthermore, reduce your tax liability. This term can refer to any expenses that can be used as a way of reducing your taxable income. For example, if your gross income is $100,000 and you have $30,000 in various tax deductions, you can use these tax deductions to reduce your taxable income to $70,000. So, tax deductions decrease your taxable income. And, the lower your taxable income is, the lower your tax bill will be. Sounds good, right?
Tax deduction lowers persons’ tax bills by lowering their taxable income
Even though tax deductions can help you cut your bill, many people still think that only rich and famous people should deal with this matter. However, that is not the case. Before 2018, you could claim tax deductions for moving expenses if you had to, for example, move over long distances for a job. Unfortunately, as of December 2017, the deduction for moving expenses was eliminated from the tax code for most people.
What were the requirements for claiming tax deductions for moving expenses before 2017?
Bear in mind that even before 2018, not all moving expenses were deductible. You could claim deductions only for those expenses that were closely related to the process of relocation. For example, after moving state to state, you could claim deductions for expenses such as packing and shipping. But, that is not all! You also needed to fulfill all of the three requirements in order to claim the tax deduction. Here are those three requirements that had to be met:
- The reason for moving to a different place was because of a job. And, you had to start working within one year of the time you moved to a different place. If you have fulfilled this requirement, you have met the “closely related to starting work” test.
- Your new job location had to be more than 50 miles farther from your former home than your old job location was. In order to be sure that you are meeting the distance requirement, you had to measure two things. The distance between your old job location and your former home, and the distance between your new job location and your former home.
- People had to work full-time on their new job location, for at least 39 weeks during the first 12 months after the relocation. In short, you needed to work long enough to meet the last, this requirement.
There were some exceptions to meeting all three requirements, but they were mostly focused on people who work abroad, who had retired, or who were disabled. So, if you want to learn more about tax deductions for specific groups, such as retirees, you can check out the website of the IRS.
Before 2018, a person had to fulfill three requirements to be able to claim their tax deductions
Are there any exceptions to the new tax reform?
As we have already told you, there are some exceptions when it comes to claiming tax deductions for moving expenses. These exceptions include military members who are on active duty and have to move from their current station. It is really important to point out that, even in this case, the moving expenses need to be “reasonable”. Thus, you can claim tax deduction only for expenses that are closely related to the process of relocation.
So, is it a good idea to relocate for a job even though you can’t claim tax deductions for moving expenses?
Ever since the new tax reform was introduced, people have started to wonder whether it is a good idea to relocate for a job now that they can’t claim tax deductions for moving expenses. So, if you find yourself presented with an opportunity to relocate with the best long-distance moving companies to a different place only because of a job, should you go for it? We say YES!
Job relocation comes with many new opportunities you should embrace
Even though being able to cut your tax bills was one of the benefits of job relocations, it was never the reason why you have decided to move from one place to the other. In addition to this, there are many ways that can actually help you save money on your relocation! For example, with the help of some simple moving tips, you can learn how to find free packing supplies, which alternatives to traditional packing materials to use, how to move fewer items, where to sell the items you are not using anymore, and so on. With the help of these tips and by hiring a reliable moving company at a cost-effective price, you will save a lot of your money!
So, yes, it is quite a shame that the new tax reform doesn’t allow you to claim tax deductions for moving expenses. However, we are here to help you relocate hassle-free and without having to spend all of your life savings! Verified Movers has got you covered!