Allowable Moving Expenses on Taxes
If you're in the process of finding a home in Saratoga, you should know about tax deductible moving expenses. It's one huge benefit that helps cut the cost of moving. Keep in mind, if you are moving as part of a job relocation and your employer is covering the cost, there won't be much to deduct.
What Can Be Deducted?
The Internal Revenue Service (IRS) keeps a fairly short list of deductions that are allowed. Check out the list below to see what you can deduct from your taxes after you move:
- Costs used to connect and disconnect utilities
- Cost of packing, transporting and insuring your belongings
- If you are traveling by car to your new home, you can deduct your gas, oil, hotel charges, parking fees and toll-booth expenses
- Deductions for one trip used to house hunt are allowed. It is not possible to deduct the cost of multiple trips used to find a house.
- The cost of transporting vehicles and pets to your new residence
How Do I Know If I Qualify?
First things first, the IRS only allows moving deductions if the move is job-related. A new job, a transfer within the same company and even a first job all qualify you for tax deductions. However, moving because you like the weather elsewhere, does not count.
The IRS requires that you work full time for about 10 months in the area of your new location to ensure you moved because of work. However, it does not need to be at the same job for the entire 10 month duration.
There is also the 50 miles rule. The IRS requires that the commute from your old residence to your new job location be at least 50 miles longer than your old commute.
If you are a business owner, you can change residences and take the moving deductions as long as you meet the 50 miles and 10 month long full-time employment criteria.
Self employed? Expect a longer required full-time employment span. The IRS requires 20 months of full-time employment for self-employers to receive their deductions.
Other Tax Breaks
Mortgage Interest: For most homeowners, the bulk of your house payment goes toward interest. Fortunately, all of that interest is deductible.
Points: If you used points to get a better rate on home loans, you are eligible for a tax break, as well. The IRS allows points to be deducted in the year you paid them, if the loan was to purchase or build your home.
Property Taxes: Your share of taxes in the first year of your home is fully deductible. Also, taxes included on your annual loan statment can be deducted.
Closing: If you decide to move, you can catch a break on the taxes based on the profit you make from selling your home. If you use the money from your old house to buy a new one, you can avoid paying the tax on the sale of a residence.