Keeping Pace at the Speed of Life - Part 2
by Bob Williams
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Last time we talked about the impact children could have on your tax picture. This time around, we’re taking a look at change of scenery.
Let’s face it: We are a mobile society like never before. Where once it was unheard of for a family to move even once during the entire lifetimes of the parents, nowadays, if you don’t pick up and move every five to 10 years or so, you may be seen as resistant to change in the job market. In many markets, being mobile isn’t just a possibility; it’s expected.
If you moved across town this tax year, you may not qualify for any income tax break. One of the main tests to claim moving expenses is why you moved in the first place. Was it to take a new job, or something else? If it’s something else, you can skip this part; it fails the test.
Another test is the distance you moved. Place the end of an imaginary tape measure at your old residence and measure the distance to your old job location. Got it? Now, starting again at your old residence, measure from there to your new main job location. If this distance isn’t at least 50 miles farther from your former residence, you don’t pass – and you don’t qualify for the deduction.
The last test is time; in most cases, you can consider moving expenses incurred within one year of the time you first reported to work at the new location as being related to your new job. For the finer points of deduction of relocation, look at IRS Publication 521, Moving Expenses.
Crunching the Numbers
But what if you didn’t have to move, because you got a raise? Well, Smarty-Pants, you may still have some decisions to make. That new pay scale could throw you into another tax bracket. And remember that some company benefits, such as 401k participation, may be set up in terms of percentage of your paycheck. So the dollar amounts will change when you get a raise. If that’s not what you have in mind, you’ll have to contact your payroll department to keep the numbers where you want them.
Hitting the Open Road
If you bought a new vehicle during the tax year, there’s not much in the way of tax breaks for your new ride. The last large-scale tax breaks on new cars were phased out in 2009. If you itemize your deductions, you may be able to deduct local and state sales taxes on a new vehicle, however.
You can expect to get a deduction, however, if your ride – if purchased before 2012 – is fueled by fuel cells. They get a payback on Form 8910, Alternative Motor Vehicle Credit. Certain plug-in electric cars can get a break using Form 8936, Qualified Plug-In Electric Drive Motor Vehicle Credit.
Next Time: Home, Sweet Deduction
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