If you've recently been tapped for a promotion, you may still be working through a number of different reactions, from elation and pride to anxiety and concern -- with the latter set of emotions taking hold whenever you begin to think about planning a cross-country relocation. Fortunately, if you're still in the process of negotiating your salary, bonus structure, and moving timeline, it's not too late to see how many of these costs (not to mention hassles) can be taken care of on your behalf as part of your total compensation package. Read on to learn more about the moving benefits you may be able to negotiate, as well as how your employer's payment or provision of certain moving-related expenses could affect next year's tax burden.
What types of moving expenses can your employer cover?
While it can be in an employer's interest to pay to relocate a valuable employee rather than spend these funds attempting to recruit or train a new employee, not all employers offer to cover moving costs out of a sense of benevolence; in many cases, these costs are deductible against your employer's profits, lowering its tax burden while ensuring it maintains a supply of loyal and time-tested workers.
If your employer does offer to shoulder some of your moving expenses, it's important to keep a few things in mind.
First, you'll likely be required to document these expenses – an employer who simply writes a blank check for an employee's moving expenses is unlikely to qualify for the federal tax deduction, which requires much more specificity. You may also be required to refund any unused money (like security deposits) to your employer to maintain its eligibility for the moving expenses tax deduction.
You'll also want to see how your acceptance of employer-paid moving expenses will impact your ability to seek and accept other employment. Many companies that regularly pay moving expenses on their employees' behalf will include a provision in the employment contract requiring the employee to repay a portion (or even all) of these expenses if the employee quits or is fired within a certain period of time after relocation. While this is a reasonable expectation on an employer's behalf, employees who may be actively job-hunting or who already have one foot out the door may be better off paying (and deducting) their own moving expenses rather than tethering themselves to one specific employer.
How will paying moving expenses this year affect your taxes next year?
Under federal law, you're permitted to deduct any moving-related expenses on your federal taxes as long as the move fulfills two requirements – the "time" test and the "distance" test. Fulfilling both requirements is deemed enough to render your move "work-related" and permit you to deduct most reasonable moving-related expenses, with just a few exceptions.
The time test is the simpler of the two, and requires you to have worked (or intended to work) full-time for at least 39 weeks during the year after you've arrived in your new location. This is designed to prevent you from using the federal tax system to finance a personal relocation -- for example, by obtaining a minimum-wage job in Florida, quitting immediately upon arrival, and enjoying the rest of your retirement in the Sunshine State while recouping all the funds you spent to get there. However, if you lose your job through no fault of your own or switch from one employer to another during your first year in your new location, you should still qualify for this deduction.
The "distance" test is the second component, and requires your new job location to be at least 50 miles farther from your new home than your old job location was from your old home. For example, someone who lived 40 miles from his old job would not be able to deduct moving expenses if this job moved another 40 miles away, even though such a move could render the commute unmanageable; on the other hand, someone who traveled only 5 miles to work could deduct moving expenses after obtaining a new job 55 miles away. For this reason, among others, it's best to maintain as minimal a commute as possible after a job-related move.
Keep these ideas in mind as you reach out to a moving company like Wheaton World Wide Moving.Share