Tax Implications of Moving

When you’re planning a move, it’s essential to be aware of the potential tax implications that may arise. Here are some deductions and expenses to consider:

Moving Expenses Deduction:

1. If you’re moving due to a change in your job or business location, you may be eligible for a moving expenses deduction.
2. To qualify, your new workplace must be at least 50 miles farther from your previous home than your old workplace was from your old home.
3. Qualified moving expenses can include transportation costs, lodging, and storage fees.
4. Keep in mind that the Tax Cuts and Jobs Act of 2017 suspended this deduction for most taxpayers except members of the U.S. Armed Forces.

Job-Related Moving Costs:

1. If you’re moving for a new job, some job-related moving costs may be tax-deductible, even if you don’t meet the distance test mentioned above.
2. Qualified expenses may include transportation, lodging, and storage fees directly related to your job relocation.
3. It’s important to keep detailed records and receipts of these expenses for tax purposes.

Home Sale or Purchase Costs:

1. If you’re selling your old home, you may be eligible for certain tax benefits. The most common is the home sale exclusion, which allows you to exclude a portion of the gain from the sale of your primary residence from your taxable income (up to certain limits).
2. On the other hand, if you’re purchasing a new home, you may be able to deduct mortgage interest and property taxes paid on your new property. These deductions can help reduce your overall tax liability.

State and Local Taxes:

1. When moving to a new state or locality, it’s crucial to consider the differences in state and local tax rates.
2. Some states have higher income tax rates or property tax rates, while others may have no income tax at all.
3. Understanding the tax implications of your new location can help you plan and budget accordingly.

Moving for Education:

1. If you’re moving to attend college or university, certain education-related expenses may be tax-deductible or eligible for tax credits.
2. Expenses such as tuition, fees, and textbooks may qualify for education tax benefits, such as the American Opportunity Credit or the Lifetime Learning Credit.
3. Be sure to review the specific criteria and limitations for these tax benefits to determine your eligibility.

It’s important to consult with Matthew Jennings, JD, MBA, EA, RFC®, CEP®, CES™, aka Tax King Matt or use tax software to ensure you’re aware of all relevant deductions and expenses specific to your situation. Tax laws and regulations can change, so staying informed and seeking professional advice is crucial for accurate tax planning.