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12 Tax Tips to Be Aware Of

Moving Tax Tips

If you just received a move out letter or you’re just getting ready to move neighborhoods, understanding potential tax implications is crucial. Being aware of these tax tips can help you plan and navigate your move more effectively, ensuring you’re prepared for any tax-related changes that may come your way. From deductions and credits to changes in state tax laws, being proactive and informed can save you both time and money. In this article, we’ll explore twelve essential tax tips to be aware of when moving.

  1. Moving expenses deduction

If you’re relocating for work and meet specific criteria, you may be eligible to deduct moving expenses on your tax return. However, in 2021, the Tax Cuts and Job Act suspended this deduction for most taxpayers, except for members of the armed forces on active duty. It’s essential to review the latest tax laws, work with a tax professional or utilize tax software if filing your tax return yourself to ensure your complaint and up-to-date with current tax regulations.

  1. State and local taxes

Moving to a different state or city can impact your tax obligations. Each state has its own set of tax laws, including income tax rates, sales tax rates, and property tax rates. Some states may have higher or lower tax burdens, influencing your overall tax liability. Ensure you research and understand the tax implications of your new location to plan for any changes.

  1. Home sale or rental income

If you sell your primary residence when moving, you may be subject to capital gains tax on profits made from the sale. However, there are also exemptions available for homeowners, such as the primary residence exclusion, which can reduce or eliminate your tax liability. Additionally, if you decide to rent out your previous home, you must report your rental income on your tax return and follow specific rules and regulations governing rental properties.

  1. Tax credits and incentives

Some regions offer tax credits or incentives to attract individuals and businesses to relocate. These incentives include tax breaks for job creation, investment, or specific industries. If you’re moving for work or starting a new business, it’s worth researching whether your new location provides any tax advantages that could benefit you.

  1. Loan interest deductions

If you take out a loan, such as a mortgage or a payday loan on your new home, the interest you paid on that loan may be tax-deductible. Mortgage interest deductions allow homeowners to deduct the interest paid on qualified loans, with limitations. When you move, you might obtain a new mortgage or refinance an existing one, which affects the amount of deductible mortgage interest on your tax return. It’s important to understand the eligibility requirements and any changes in mortgage interest deductions that may arise due to your move.

  1. Tax filing requirements

Moving to a new jurisdiction may require you to update your tax filing status and submit tax returns to the appropriate agency. Each state or country has its own tax filing system and requirements, and failing to meet them can result in penalties or legal consequences. Ensure you understand existing filing deadlines, forms, and additional obligations imposed by your new tax jurisdiction.

  1. Moving for work

If you’re relocating for a new job or a transfer within your existing company, your employer may provide certain relocation benefits. These benefits could include reimbursement for moving expenses, temporary housing, or even a relocation allowance. It's essential to understand the tax treatment of these benefits, as they may be subject to income taxes. Some relocation benefits may be tax-free, while others may be taxable and included as part of your income.

  1. State residency and income sourcing

Moving to a new state changes your tax residency status and impacts how your income is sourced and taxed. Some states have different rules regarding residency determination, and you may be subject to the income tax laws of your new state4. This affects how your wages, self-employment income, or investment income are taxed yearly. Additionally, if you work remotely for an employer in a different state than your residence, you may need to navigate complex rules regarding income sourcing and potential double taxation.

  1. Estate and inheritance taxes

Moving Tax Tips

Moving to a new jurisdiction may also affect your estate planning and potential estate or inheritance taxes. Different regions have varying estate tax laws, and your new location may have different exemption thresholds or tax rates. If you have substantial assets or plan to pass on your wealth to heirs, it's necessary to review and update your estate plan to account for any changes in the tax landscape.

  1. Tax treaties

If you’re moving to a different country, it’s essential to consider the tax treaty between your current country of residence and the new country. Tax treaties are agreements designed to avoid double taxation and provide relief for individuals with tax obligations in both countries. Understanding the provisions of the tax treaty can help you navigate your tax obligations, determine which country has taxing rights over specific types of income, and potentially claim any available exemptions or credits.

  1. Sales and Use taxes

Moving involves purchasing new furniture, appliances, or other items for your new home. It’s important to be aware of the sales tax rates and regulations in your new location. Sales tax rates can significantly vary between states and countries, and some jurisdictions may exempt certain items from sales tax. Understanding the sale and use tax rules can help you plan your purchases and effectively manage your expenses while you relocate.

  1. Property tax assessment

Moving to a new location may also mean a change in your property tax assessment. Different jurisdictions have varying methods for assessing property values and determining property tax rates. It’s crucial to understand how your new property will be assessed for tax purposes and what the potential impact on your property tax liability may be. Consider researching the local property tax rates and any exemptions or deductions available to homeowners in your new area.

Moving and taxes

Its clear moving can bring about various tax implications. By staying informed and understanding potential tax changes associated with your move, you can make informed decisions and minimize any surprises come tax season. Whether it’s deductions for moving expenses, state income tax differences, or retirement income, or conserving the impact on your investments in real estate or other things like precious metals, being proactive about your tax planning is key. By following these tax tips, you’ll be better equipped to handle the tax aspects of your move and make a smooth transition.

Megan Isola

Megan Isola

Megan Isola holds a Bachelor of Science in Hospitality and a minor in Business Marketing from Cal State University Chico. She enjoys going to concerts, trying new restaurants, and hanging out with friends.

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