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Moving deduction hits brakes

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in Small Business Tax,Small Business Tax Deduction Strategies

If you are making a move because of your job, you may be entitled to deduct certain moving expenses.

Alert: The write-off isn’t automatic. To qualify for this tax break, you must meet a two-part tax law test involving distance and time.

Note that the requirements in this area are very specific.

1. Distance test: Your new job location must be at least 50 miles farther from your old home than your old job location was from your former home. For this purpose, the IRS uses the shortest of the most commonly traveled routes to measure the distance between the two points.

2. Time test: If you’re an employee, you must work full time for at least 39 weeks during the first 12 months after you arrive in the general area of the new job. But you don’t have to work for the same employer as long as the 39-week test is satisfied.

Assuming you qualify, you can typically write off the reasonable costs of moving household goods and personal effects to your new home, plus travel expenses (including lodging, but not meals) between the two locations. Normally, this will include charges by a moving company or a truck rental.

As shown in a new case, the IRS is adamant that you must meet both parts of the tax law test.

Facts of the case: The taxpayer, a CPA, pulled up stakes in Pennsylvania and moved to California. He arrived on March 7 and, relying on business contacts, began his job search. On June 7, he signed a one-year employment agreement with a firm, but he did not start working until July 16 and actually received his first paycheck on July 22.

Obviously, this taxpayer had no problem with the distance test, since he clearly moved all the way across the country. But what about the time test? Unfortunately, he doesn’t technically qualify because he did not work for 39 weeks during the 12 months after his arrival. Bottom line: The deduction for moving expenses was denied. (Anderson, TC Summary Opinion 2017-17, 3/16/17)

Tip: When possible, take taxes into account when planning a job-related move.

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