Time Plus Distance Equals Deduction For Job Move
I'm aware that one can deduct expenses for
relocating because of a new job, so long as they pass the 50 mile distance test
and the 36 (?) week time test'But, I thought I remembered hearing that college
graduates moving to a new job from college could not take this deduction'Is
this true, or just a figment of my imagination?
Sometimes you have to trust your instincts, or, in your case, your imagination'Although there are some tax laws that seem designed to exclude students fresh out of college (deductions for education expenses, for example), this isn't one of them.
In general, a moving expense deduction is allowed for people who can pass two tests, and, of course, as a former college student, you're used to passing lots of tests.
The first test is a distance test'The new job must be located at least 50 miles from your old residence'This is the test that probably hangs up many college students'Your residence is not your dorm room, but the address you use when you file your tax returns'If you're attending college in Louisiana, but call Indianapolis home, and you come back to Indianapolis to take a job after you finish college, your move from college back home again to Indiana is not considered a deductible moving expense.
The other test is a length of employment test'You must work full-time in the new location for at least 39 weeks of the 12-month period after your move'It doesn't matter if this is your first job out of college, or a change from a former job to a new job, as long as you stick around and work for 39 weeks'(Note: the length of employment test requires 39 out of the first 52 weeks AND 78 out of the first 104 weeks if you are self-employed.)
The 39-week employment requirement doesn't have to be met at only one job'You can take one job while you look for another, the make a change to another job, and add the weeks spent at both jobs to come up with 39 out of 52 weeks.
What happens if you move in September 1998, and start a new job, but finds that 39 weeks haven't passed yet by the end of the year? In this situation, you have a choice'You can play the odds and assume you'll continue to work for the full 39 weeks, and go ahead and take the moving expense deduction on your 1998 tax return'Keep in mind that you are required to go back and amend your 1998 return, removing the deduction, if it turns out that you stop working in 1999 and don't meet the 39-week test.
If you're not sure if you'll meet the 39-week requirement, you can play it safe and wait until the test has been met during the next year, then go back and amend your 1998 return to claim the deduction.
So what do you get, if you pass these two tests? You are allowed to take a deduction, on page one of your tax return (you don't have to itemize) for all costs associated with the physical move of your belongings from your former home to your new home'This includes the amount paid to a moving company, or, if you move yourself, the cost of a truck rental'If you simply use your car to move yourself and it takes a few trips, you would deduct the mileage for each trip (calculated at 10¢ per mile).
In addition you may deduct the cost of travel associated with moving yourself and any family members you take with you from your old location to your new home'Travel costs include airfare, train, bus, or automobile mileage (at 10¢ per mile).
Should you be fortunate enough to have an employer reimburse you for your moving expenses, you will find the reimbursement added to your income on your W-2 form'You'll get to offset this income on your tax return with the deduction you take for moving expenses'Sometimes generous employers reimburse their employees for more than the deductible amount of moving expenses'If you received a moving expense allowance or reimbursement for expenses such as a house hunting trip, or temporary living expenses in the new location, these amounts are considered taxable income to you because you can't offset the reimbursement with a deduction for the related expenses.
Now that you're out of college and working in the 'real world,'you can look forward to a lot of fun tax return experiences, such as filing the 'long'form, itemizing deductions, claiming exemptions, reporting retirement contributions, offsetting capital gains with capital losses, paying social security taxes, getting social security income (well, probably not for awhile), and passing all manner of tests of patience while you attempt to decipher confusing tax laws.