If you moved to a new home because of your job or business, you may be able to deduct the expenses of your move. To be deductible, the moving expenses must have been paid or incurred in connection with starting work at a new job location. Moving expenses are discussed in detail in Publication 521, Moving Expenses. However, there are various rules that apply specifically to moves to or from a foreign country. Those rules are mentioned here.
Retirees or Survivors Who Move to the United States
If you are a retiree who was working abroad or a survivor of a decedent who was working abroad and you move to the United States or one of its possessions, you do not have to meet the time test discussed in Publication 521. However, you must meet the requirements discussed below under Retirees who were working abroad or Survivors of decedents who were working abroad.
United States defined. For this section of this publication, the term "United States" includes the possessions of the United States.
Retirees who were working abroad. You can deduct moving expenses for a move to a new home in the United States when you permanently retire. However, both your former main job location and your former home must have been outside the United States.
Permanently retired. You are considered permanently retired when you cease gainful full-time employment or self-employment. If, at the time you retire, you intend your retirement to be permanent, you will be considered retired even though you later return to work. Your intention to retire permanently may be determined by:
-
Your age and health,
-
The customary retirement age for people who do similar work,
-
Whether you receive retirement payments from a pension or retirement fund, and
-
The length of time before you return to full-time work.
Survivors of decedents who were working abroad. If you are the spouse or the dependent of a person whose main job location at the time of death was outside the United States, you can deduct moving expenses if the following five requirements are met.
-
The move is to a home in the United States.
-
The move begins within 6 months after the decedent's death. (When a move begins is described below.)
-
The move is from the decedent's former home.
-
The decedent's former home was outside the United States.
-
The decedent's former home was also your home.
CAUTION! If you are living in the United States, retire, and then move and remain retired, you cannot claim a moving expense deduction for that move.
Storage Expenses
For foreign moves, costs of moving household goods and personal effects include reasonable expenses of moving the items to and from storage and storing them while your new place of work abroad is your principal place of work.
Foreign Moves
A foreign move is a move in connection with the start of work at a new job location outside the United States and its possessions. A foreign move does not include a move back to the United States or its possessions.
Allocation Of Moving Expenses
When your new place of work is in a foreign country, your moving expenses are directly connected with the income earned in that foreign country. If all or part of the income that you earn at the new location is excluded under the foreign earned income exclusion or the housing exclusion, the part of your moving expense that is allocable to the excluded income is not deductible.
Also, you cannot deduct the part of the moving expense related to the excluded income for a move from a foreign country to the United States if you receive a reimbursement that you are able to treat as compensation for services performed in the foreign country.
For an explanation and example of how the allocation is done, refer to Moving Expenses in Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.
Tax Withholding and Estimated Tax
Your employer must withhold income tax, social security tax, and Medicare tax from reimbursements and allowances paid to you that are included in your income. See Reimbursements Included in Income below.
Reimbursements Included in Income. Your employer must include in your income any reimbursements made (or treated as made) under a nonaccountable plan, even though they are for deductible moving expenses. See Publication 521. Your employer also must include in your gross income as wages any reimbursements of, or payments for, nondeductible moving expenses. This includes amounts your employer reimbursed you under an accountable plan (explained in Publication 521) for meals, house hunting trips, and real estate expenses. It also includes reimbursements that exceed your deductible expenses and that you do not return to your employer.
Reimbursements Excluded from Income. Your employer should not include in your wages reimbursements paid under an accountable plan for moving expenses that you:
-
Could deduct if you had paid or incurred them, and
-
Did not deduct in an earlier year.
These reimbursements are fringe benefits excludable from your income as qualified moving expense reimbursements. Your employer should report these reimbursements in box 12 of Form W–2.
CAUTION! You cannot claim a moving expense deduction for expenses covered by reimbursements excluded from income. In addition, you cannot claim a moving expense deduction for a move from the United States to a foreign country if after you leave the United States you will become a nonresident alien and your future income in the foreign country will not be subject to U.S. taxation.
For more information refer to Tax Withholding and Estimated Tax in Publication 521, Moving Expenses.
References/Related Topics
|