Questions for the Tax Lady: July 26th, 2010

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question #1: Do all states have a sales tax?

No. Actually only 45 states, as well as the District of Columbia levy a general sale and use tax. Alaska, Montana, Delaware, New Hampshire, and Oregon do not impose a state sales tax. However, Alaska does allow for local sales taxes, and a few other states have a variety of specific excise taxes.

Question #2: If I have to move to a different state for a new job, can I deduct all of my moving expenses?

Depending on how far you have to move for the new job, and how long you work for the new employer, you may qualify to deduct qualifying expenses. Some of these expenses include packing, transportation, shipping costs, and storage bills. For more information on the job relocation deduction, check out this article on the Roni Deutch Tax Center – Tax Help Blog.

Cost-Saving Moving Tips

Now is a great time to buy a new home! However, to qualify for the $8000 tax credit, you must know that time is of the essence. To qualify for the tax credit, you need to be in a signed contract by April 30th and you’ll have until June 30th, 2010 for the sale to close. One of the extra expenses of a new home is the cost of moving. A recent Kiplinger’s article provides some great tips on how to save on your move into your new home. Take a look at a couple of money-saving tips below and don’t forget to go to my Tax Help Blog to check-out whether you qualify to deduct some of your moving expenses on next year’s tax return.

1. Don’t Pay Full Freight. Are you going cross-country? A move for a 3-bedroom home could cost as much as $8,000! Try to move in the off-season, between October and April and you can save 10%. Get several written estimates with rates per hour (for a local move) or per pound (for an interstate move). Bids should cover every room in your house and should be done in person.

2. Kick the tires. If you're moving across town, ask around for recommendations and then go to the Better Business Bureau's Web site to make sure there haven't been any complaints filed against your prospects. If you're moving across state lines, your first pit stop is the web site of the American Moving & Storage Association, a trade group. From the home page, click on "Find a ProMover Now," and as many as six movers will call to set up an in-home estimate. If you have a firm you want to use for an interstate move, you can make sure it's licensed with the Federal Motor Carrier Safety Administration and view the company's complaint and safety record by clicking "Search Movers & Complaint History."

3. Let Uncle Sam help pay for it. If your move is job-related, you may be able to deduct some of your moving expenses whether or not you itemize your deductions. You must move within a year of your first day at the new job. In addition, your new office has to be at least 50 miles farther from your old house and office. If you qualify, you can deduct the cost of moving your household goods and traveling, but not meals. Some moving-related expenses that can be deducted for a job-related move include:

• Packing and transportation costs for moving household goods
• The cost of shipping goods from a place other than your former home (such as a storage unit)
• Any storage bills, or fees for disconnecting or reconnecting utilities
• All move-related travel expenses (such as mileage, tolls, lodging, parking fees, etc.)
• Expenses of shipping or relocating your car and pets to your new home

Continue reading Kiplinger’s full article here.

Questions for the Tax Lady: March 15th, 2010

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question #1: Are moving expenses tax deductible?

Not really. If you have to relocate for a job, then you can deduct the related costs. However, you must pass the IRS’ time and distance test. Meaning you must work full time for at least 39 weeks the first year after starting the new job, and your new place of work must be at least 50 miles further from your former place of residence than the old job was. For more information on moving related deductions check out this entry on the RDTC Tax Help Blog.

Question #2: Is it true the federal tax adoption credits are going to expire at the end of the year?

No, the tax credits are not going to go away entirely at the end of the year. However, the credit will be reduced by 50% (from $12,170 in 2010 to only $6,000 in 2011) unless congress extends the Tax Relief Reconciliation Act of 2001. Although the Senate and House are busy with controversial issues like health care reform and job creation, adoption credits are very popular and I would expect that Congress will extend the full credit, and possibly even increase its dollar value.

Tax Deduction of the Week: Job Relocation Expenses

Earlier in the week, I posted a new entry on the RDTC Tax Help Blog deduction of the week series. The new article explains the job relocation expense deduction and you can find a section of the text below. Checkout the RDTC Tax Help Blog to see the full entry, as well as former deduction of the week articles.

Examples of Moving Expenses that can be Deducted:

• Packing and transportation costs for moving household goods
• The cost of shipping goods from a place other than your former home (such as a storage unit)
• Any storage bills or fees for disconnecting or reconnecting utilities
• All move-related travel expenses (such as mileage, tolls, lodging, parking fees, etc.)
• Expenses of shipping and relocating your car and/or pets to your new home.
  

Expenses that can NOT be Deducted:

• License plates and registration for your car
• Any part of the purchase of a new home or expenses of leasing a new apartment
• Real estate taxes or lost security deposits

Relocation Rules

According to the IRS, “you can generally consider moving expenses incurred within one year from the date you first reported to work at the new location as closely related in time to the start of work. It isn't necessary that you arrange to work before moving to a new location, as long as you actually do go to work.”

Time Test

To qualify for the deduction you must work full time for at least 39 weeks during the first year after starting the new job. You do not necessarily have to work for the same employer, and you do not need to work for 39 weeks consecutively. However, you will need to work full time within the same commuting area for 39 full weeks.

Continued at RDTC.com…

Writing Off Job-Related Moving Costs

Unfortunately, job-related moving expenses are amongst the more commonly forgotten tax write-offs. However, as Don’t Mess With Taxes—one of my favorite tax blogs—explained in a new entry, taking advantage of incentives for moves related to a new job are actually more straightforward then you might think.

Moving tax tips: One of the nice things about moving for a job is that you can deduct some of those costs. Even better, you don't have to itemize to claim these expenses.

You must, however, meet a couple of basic requirements.

The move has to be work related. You can't simply write off a change of scenery.

You also must meet the IRS' time and distance tests.

"Time" means you have to work at your new location for at least 39 weeks in the first year after your move.

"Distance" requires that your new job be at least 50 miles farther from your previous residence than your last office was from that home. Basically, the IRS isn't going to help pay for a move that simply provides you an easier commute.

If you're reentering the full-time workforce, you can claim the deduction even if you don't have a job when you move.

If you're married and file jointly, only one spouse needs to meet both the time and distance tests.

Filing basics: As for filing itself, you do have to fill out another piece of tax paperwork, Form 3903.

And, no surprise here, the IRS has plenty of moving deduction do's and don'ts. Here are some of the more interesting ones.

Costs to transport pets are deductible.

So is the cost to have your car hauled to your new home.