Lots of my neighbors are looking to sell, even though for most of us there's no longer a tax break for moving. However, many homeowners still will pocket tax-free sales cash that should help cover relocation expenses.
Summer always kind of freaks me out, and not just because here in Central Texas it tends to get too damn hot too damn soon.
I'm talking about all my neighbors who want to leave. Every summer there's a plethora of "For Sale" signs in yards throughout our community. I immediately start worrying. What's wrong with where we live?!?
Maybe my neighbors are fleeing because of the summertime temperatures.
Or maybe, and more likely, there's nothing wrong with the neighborhood where we all, for now, live. Folks simply move. A lot of them. Every year.
And summer is a good time to pack up and go, especially if you have a family. The youngsters' classes are over and there's time over the next few months to get resettled and the kiddos enrolled in their new school districts.
No more tax code moving help: This year, though, my departing neighbors aren't going to get any help in schlepping their possessions to a new hope.
The Tax Cuts and Jobs Act has eliminated, at least from tax years 2018 through 2025, the above-the-line deduction for moving expenses. The new tax law also does away with the tax-free workplace benefit of employers paying for or reimbursing workers for their job-related relocation costs.
Under the prior law, when you moved for work purposes you could use many of those transfer expenses to reduce your gross income to a lower adjusted gross income level. Or, if your new employer paid or reimbursed you, you didn't have to count that money as taxable income.
That's still the case if you moved in 2017 and postponed filing that tax federal tax return until Oct. 15. If this applies to you, get details on what to do in my earlier post on deducting moving costs.
But now, for tax years 2018 through 2025, the TCJA says that the moving costs deduction can be claimed only by U.S. Armed Forces personnel who are on active duty and who move pursuant to a military order related to a permanent change of station.
Other ways to pay the mover: If you'd been counting on some tax savings to help you relocate, you need to make other arrangements.
A pre-move garage sale could help you reduce what you'll need to transport and put a few tax-free dollars in your bank account.
You also might want to talk to your employer about more money to help cover your moving costs. Just be sure that the added compensation also is enough to pay the additional taxes you'll owe on the increased income.
Tax free home sale profit: Then there's the cash you'll pocket tax-free (I hope) when you sell. That definitely could help ease your relocation costs.
The key requirement here is the two-of-five rule regarding ownership and residency. To get this valuable tax break, during the five-year period ending on the date of your home sale you must have owned the residence for at least two years and lived in the property as your main home for at least two years.
Remember, your potentially tax-free real estate profit is the difference between what you get when you sell your home (this likely is the only time you'll agree with your local tax assessor's inflated value of your house!) and its basis, which starts with what you paid for the house plus, for example, the cost of improvements and other real estate related expenses.
You can read more about when a residence's sale is tax free in the Internal Revenue Service's latest summertime tax tip. I also highly recommend my earlier blog post on this topic, which includes a link to an article I wrote detailing the home sale tax break.
Regardless of how you finally pay for your move, here's hoping it's a safe and easy one. We'll miss you!
You also might find these items of interest:
- Most millennials want houses like their parents, eventually
- Tax differences between home repairs & home improvements
- Home improvements that can pay off on your taxes when you sell