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How to Save When Relocating for a Job
Moving to another state for a new job can be stressful, especially when your new employer doesn't cover many of the moving expenses and you find yourself doing most of the heavy lifting financially. More employers are cutting back and reducing relocation benefits, or not offering them at all. But there are a number of ways to lower your moving costs and ease your tax burden as well. Here are some financial factors to consider when relocating for a new job depending on your age and stage in life:
20s thru 30s
Younger workers typically are the most willing to move long distances to land a new job, and often they won't pay as much in moving costs because they don't have as much to transport. If they're renters instead of homeowners, the financial burden maybe even less. A 2002 survey by the Employee Relocation Council found that relocation costs for a new hire who rents is about $20,000, compared with $65,500 for a homeowner. Luckily for both, tax write offs for moving-related expenses abound and relocation-related expenses are deductible "above the line" -- meaning you don't have to itemize to take them.
In addition to paying a mover or any rental costs if you choose to move yourself, you can write off mileage costs (14 cents a mile), and deduct lodging expenses for two nights (one night after your household goods are packed, the second at your new location the day you arrive). If you need to store furniture while you look for a new home, you can write off the cost for up to 30 days, as well as the cost to move the stored items to your new home. You can even write off the tips you pay to the movers. To learn more about moving-related deductions, see IRS Publication 521.
40s thru 50s
Moving-expense deductions aren't the only tax-related issues for high-income workers -- if you expect to earn more than $87,900 this year, you may end up paying too much into Social Security. Both your old employer and your new one are required take out Social Security contributions from your paycheck, up to a maximum of $5,450. At year-end, check your pay stubs -- if you paid more than this amount include the overpayment on your 2004 IRS 1040 form, in the line under the "Payments" section for excess Social Security tax withheld.
If your move is to a senior position overseas, you may have more wiggle room than the average worker in getting your employer to pay relocation costs; that's good news because an overseas move can get pricey. Expenses you may have to pay include language training, transportation costs for a car or pet, housing expenses for two homes and international-school fees for your kids. So, when you're negotiating pay, don't be shy about asking for the maximum relocation benefits allowed.
60s, Plus
If you move to a retirement community, but later decide to go back to work, you may be able to write off the moving expenses. But you'll need to stick with it -- to be eligible for the deduction, you must work at least 39 of the first 52 weeks after you make the move.
If you work for yourself, there's a bit more breathing room. Self-employed seniors need to at least 78 weeks out of the first two years after you make the move -- including at least 39 weeks in the first year. You can also deduct your moving expenses on your 2004 tax return even if you haven't yet met the time test by the date your return is due. But keep good records: The IRS will require you to prove that you did actual work during this time.
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