Your clients might not know that they can deduct certain expenses that might incur when they move from their total tax income. However, moving will not automatically qualify them for a tax deduction. Here are some things that you need to know in order to be able to deduct whatever moving expense that may be deductable from their total tax liability.
What Are The Requirements?
The basic requirements to qualify for this type of tax deduction is that they must be moving for the purpose of seeking a new job in a new city, or if their job is assigning them to another city or state. They should be qualified to deduct moving expenses from their income if they meet these requirements. All costs and expenses that may incur in the process of moving can be included in total moving expense that would be deducted from the clients total tax income. These would include the cost of travel, gas, lodging, as well as the shipping and packing costs of moving some of their personal properties and goods. If you have already made a determination that they qualify under these requirements, they must now pass the distance and time tests to truly qualify.
Distance Test
One of the tests that your client needs to take in order to pass the requirement is the distance test. This test basically tests if whether the distance from house to their new job should be greater than the distance between their old home and their old job. For example, when they use to commute about 10 miles to their old job from their old house before, but now, it would take about 60 miles for them to commute from their old house to their new job, this shows that there is a great difference in distance between the two. If they have moved to their new house because of this significant difference in distance, you can actually include this in the expenses that could be deducted from their total tax income.
Time Test
Another test that they must pass is the time test. Basically, this test will ensure that when they moved from their old place of residence to their new one, that it was specifically for business. This can be measured by the number of weeks that they have spent working full-time after their move. It is usually 39 weeks within the 12 months after their move for employees, 78 weeks within a 24 month period for those who are self-employed.
What Are The Limitations?
When they move mainly because of their job, they can actually get certain reimbursements from their new employer, or from the company that is hiring them, depending on the company’s conditions and requirements. If, however, there are still some amount that is not covered in the reimbursements made by their company, then you can actually include those in the amount of deductibles from their total tax income. As long as they comply with all the requirements for it, you should be able to claim the tax deductions.
What Are The Steps In Deducting Moving Expenses?
When calculating how much exactly you can deduct from their total tax income based on moving expenses, you simply need to follow these simple steps in order to determine how much deduction they can actually get. The very first thing that you need to do is examine the criteria, and make sure that they are qualified for the tax deduction. The requirements are all mentioned above.
If they are qualified, begin calculating how much moving expense they have incurred. Include in your calculation all costs and expenses, such as the costs for packing and moving their personal property to their new place of residence, gas, lodging, and other travel expenses, food storage for up to a month, and other legitimate expenses.
After that, save all pertinent documents that prove their claim so that you can support your tax deduction when the time comes that you need to show proof.
What Moving Expenses Can Be Deducted?
Basically, all moving costs and expenses that your client has incurred during the actual move can be included in this list, such as the cost for shipping their vehicle, for transporting their pets, for packing and hauling all of their property, as well as their lodging expenses. Food expenses, however, are not included in the computation.
