How Tax Reform Affects IRS Moving Deductions

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Effects-on-IRS-Moving-Deductions

Often people end up changing cities for a better job opportunity or simply because they are expanding or shifting their existing business. Such a move comes paired with certain financial and emotional hassles. However, what a lot of people miss out on are the tax implications involved.

Missing out on paying your dues to the IRS can cost you both in terms of tax liability and the even duress in extreme cases. Thus, it is considered advisable to carefully consider all the tax implications involved and plan your relocation, accordingly.

As per the previously existing rules, all expenses associated with the said relocation could be deducted from their federal income tax. However, with the introduction of the Tax Cuts And Jobs Act in 2017, the entire game has changed.

This is because the new act affects both individual and business transactions. While, it has lowered the tax rate on a host of things, making it beneficial for taxpayers, a number of previous deductions have been nullified, making relocating to a new city more expensive than ever.

The critical thing to note here is that most of these laws are only applicable from 2019 onwards. This means that you will be following the said rules for the return you file in 2019 for the fiscal year 2018-19.

Here’s a brief lowdown on pre- and post- deductions as per the new TCJA reform:

Before the Act came into effect, taxpayers, moving to a different city for professional reasons, enjoyed a host of tax deductions on the expenses, thus, incurred. However, the IRS imposed certain conditions for the relocating process to be considered ‘job-related’ :

  • Time

For the relocation to be considered ‘job-related,’ the taxpayer had to work full time, at the new job, for at least 39 weeks during the first year of relocation.

  • Distance

For it to be considered tax deductible, the commute from your previous residence to your new office location had to be at least 50 miles more than your old commute.

On adhering to the following conditions, the taxpayer was eligible for deductions on a host of costs for activities related to moving. These include, but are not limited to:

  • Hiring professional movers
  • Renting a moving truck
  • The cost of supplies involved
  • Any moving insurance
  • Storage of belongings up to a 30-day period post moving
  • Transportation costs incurred in the form of petrol, diesel, etc.

Benefits Stand Nullified

However, taxpayers no longer stand to gain any tax benefits on their moving expenses. The TCJA has suspended all such tax deductions and other benefits following the fiscal year 2018-19.

In addition, the employers are required to mention moving reimbursements as taxable income for the concerned employee. This is a result of the exclusion of qualified moving income from the tax-deductible bracket.

The Only Exception

US armed forces professionals on active duty are exempted from the moving implications of TCJA reforms.

What The Future Holds

The TCJA has raised several doubts amongst taxpayers, including whether or not their employer would still reimburse them for the moving expenses incurred. The answer to that particular question remains positive, albeit subjective.
Many companies offer reimbursements to their new employees as an incentive to move to a different city. However, you need to ask this in advance and clear the issue up with the concerned HR department.

How To Save On Moving Expenses

With the tax deductions all but gone, expenses have become a matter of grave concern for people moving to a different city. However, there are still plenty of ways in which one can save money on their relocation expenses. Some of them include:

  • Finding free moving boxes

Check out the nearest supply stores, liquor stores or grocery stores to collect free cardboard boxes. Moving does involve plenty of necessary expenses, but the packaging is one thing that can be free.

  • Moving without hiring professional movers

Even if you’re shifting next door, hiring packers and movers can immediately add up to your budget. Committing to moving yourself gives you the authority on how to keep the expenses low and how to protect your precious belongings as well.

  • Planning the moving date smartly

Instead of moving during peak season, plan your move during a time period that proves to be more economical. Usually, fall and winter periods are considered more economically conducive for such activities.

  • Getting rid of unnecessary belongings

The lighter you pack, the cheaper the entire process will be. Thus, it is advisable to either sell or donate much of the disposable belongings you may be carrying.

Conclusion

It is easy to see how TCJA has made relocating more expensive for moving professionals. However, with the decreased tax rates on most things, the TCJA comes bearing more gifts than liabilities.

For more such tax news and updates, stay tuned with MyTaxFiler.  We also provide a one-stop solution for all your tax-related woes. Simply drop a mail at tax@mytaxfiler.com or call us at  (888)-482-0279 for an on-call consultation.

 

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