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Moving & Taxes: Your Questions Answered

Are you thinking of moving or doing business in another state? Read through to get some quick answers to your tax questions.

What tax implications should someone consider if they are moving from one state to another? What records would they need to show, if any?

From a business perspective for self-employed individuals, if you are living in one state and then move to another one and you have conducted business in both locations, then you will owe taxes in both states. Beyond the state taxes, you may also owe city and local taxes, too, so it’s important to check that out. 

It should be noted that moving expenses are no longer tax deductible due to changes instituted by the Tax Cuts and Jobs Act (TCJA) which eliminated this provision from the tax code for most taxpayers in 2018. 

It's still available to members of the Armed Forces as a Schedule 1 "above the line" adjustment to income. They would need to supply all applicable receipts to substantiate the deductions.

What factors determine where your true tax home is? 

A taxpayer’s tax home is the geographical region where they earn most of their income, regardless of their permanent residence. 

The IRS views the tax home as the location used to determine where a taxpayer has deductible travel expenses. A permanent residence is the mailing address of an individual.

In this context, an employee traveling away from home for business for a period longer than an ordinary workday would report those deductions on their federal and state tax return in the jurisdiction where they live. However, if they commute to work in another city each day, they cannot write off those expenses because they are considered regular living expenses unrelated to business travel.

How does working remotely affect one’s taxes? As a remote worker employed by someone else you cannot deduct those expenses. Similarly, if you work in one city but choose to live in another because you can now work from home any related expenses will not be tax deductible. 

How can someone looking to optimize their taxes do so by moving states?

If taxes are a consideration in relocating, moving to a state such as Florida that doesn’t have income tax or that has lower state or city tax could be beneficial from the standpoint of reducing taxes owed, but be sure to do your due diligence in regard to what you actually owe in the specific jurisdictions where you reside and do business.

 

If you have questions or need help filing your taxes this year, let us give you a hand! Contact us!

Jonathan Medows, CPA

Jonathan Medows is a certified public accountant licensed in New York, New Jersey, Maryland, and Pennsylvania. He is also a recognized expert in taxation for freelancers and the self-employed—often tapped for his expert knowledge and perspective on self-employment taxation by national and regional publications such as The New York PostBusinessWeek, Forbes taxation blog, WebCPA, CPA Practice Advisor, and others. You can read some of Jonathan’s press coverage here.

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