Tax Law Changes Loom on Job-Related Moves : Employment: If you plan to relocate because of a new job, start packing. The deductibility criteria will be narrowed beginning next year.
If you are planning to relocate because of a new job, it may be time to get moving.
At least that’s the suggestion offered by tax-minded financial advisers. Once 1993 ends, they point out, the tax laws will change covering the deductions that are allowed for a variety of moving-related expenses.
So, presuming you have a choice in the matter, you need to act fairly quickly if you want Uncle Sam to pick up part of the tab for such moving-related expenses as house-hunting travel and settlement of an old lease.
“If you are planning to move as a result of employment, you may want to pay or incur as many moving expenses as possible by Dec. 31,” says the accounting firm of Ernst & Young in its paperback “Guide to the New Tax Law.”
Just about every time Congress changes the tax system, it revises the rules on job-related moving costs that aren’t reimbursed by an employer.
Under the old rules that remain in effect through the balance of 1993, a fairly broad range of deductions is allowed for any move in which your new place of work is at least 35 miles farther from your old residence than your former workplace was.
The new legislation passed in August provides that, starting in 1994, the minimum distance will be increased to 50 miles. It also narrows the definition of deductible moving expenses.
Both the old law and the new one permit an unlimited deduction for the cost of transporting household items, as well as yourself and family, from the old residence to the new one.
But while the old law includes both lodging and meal costs as travel expenses, the new one excludes meals.
The new rules permit no deduction whatever for the costs of pre-move “house-hunting trips,” and of temporary living quarters, which are deductible up to a limit of $1,500 under the old law.
The new law also excludes costs of disposing of the old home and acquiring the new one. These can be written off under the current rules, up to a overall ceiling of $3,000 that includes house-hunting and temporary-quarters costs as well.
The distance requirement, as technical as it sounds, is worth close attention. Consider this example described by the accounting firm of Grant Thornton:
“You take a new job 75 miles from your old house. Your old job was 30 miles from your old house. Finding and moving to a new home to avoid a 150-mile round-trip daily commute will not qualify for a deduction.”
In such circumstances, perhaps the employer will be more willing to reimburse expenses than it would have been if they remained deductible for the employee.
Otherwise, it would make sense for the employee in that example to move before 1994 arrives.
Other suggestions from Ernst & Young: “If you need to look for a new residence, travel before Dec. 31 so that the meals consumed while traveling and the cost of the house-hunting trip are deductible.
“If you know in advance that you need to settle an unexpired lease of the old residence, be sure to settle the costs by Dec. 31.
“Try to sell your old residence and purchase your new residence by Dec. 31, so that the costs incident to the sale or purchase are deductible.”
One additional change favors people who move after the end of this year. Starting in 1994, the moving expenses that remain deductible will be subtracted in the calculation of adjusted gross income, not as a “below-the-line” deduction available only to those who itemize.
So it will be available to non-itemizers--that is, taxpayers who take the standard deduction. This change, says the accounting firm of Coopers & Lybrand, “will permit many more individuals to take advantage of the deduction on their individual tax returns.”
