Monday, April 29, 2013

Tax Break for Moving Abroad for Work

A taxpayer can generally deduct moving expenses if he or she is moving for a new job more than 50 miles away and that lasts more than ten months.  This deduction is a very beneficial "above-the-line" deduction that is unlimited in amount and does not require the taxpayer to itemize deductions.  For most taxpayers, the deductible costs are the costs of travel (including lodging, but not meals) and of moving household items. 

But Internal Revenue Code section 217(h) provides that for a taxpayer who is moving to work outside the United States (a "foreign move"), the deductible costs also include the costs of storing items and of moving items in and out of storage. 

The typical "foreign move" is from the United States to a foreign country, but the tax break is also available for moves within a foreign country, or from one foreign country to another foreign country.  In contrast, a move from a foreign country back to the United States does not count, nor does a move from Georgia to Hawaii in 1987 count (someone unsuccessfully tried that argument).  As a result, someone who moves for a new job within the United States cannot deduct storage costs, while someone abroad can deduct an unlimited amount of such storage costs.

The extra deduction for foreign moves was added by the Tax Treatment Extension Act of 1977, which was a bit of a misnomer since it (a) contained a large number of newly created tax benefits for Americans living abroad and (b) was enacted on November 8, 1978.  At the time, section 217(h) did not draw much attention because very few Americans moved abroad and the moving expenses deduction had a total monetary cap, but those facts have changed.

Section 217 Moving expenses.

(a) Deduction allowed.
There shall be allowed as a deduction moving expenses paid or incurred during the taxable year in connection with the commencement of work by the taxpayer as an employee or as a self-employed individual at a new principal place of work.

(b) Definition of moving expenses.  (1) In general.  For purposes of this section , the term “moving expenses” means only the reasonable expenses— (A) of moving household goods and personal effects from the former residence to the new residence, and (B) of traveling (including lodging) from the former residence to the new place of residence. ***

(h) Special rules for foreign moves.
(1) Allowance of certain storage fees.
In the case of a foreign move, for purposes of this section , the moving expenses described in subsection (b)(1)(A) include the reasonable expenses—
(A) of moving household goods and personal effects to and from storage, and
(B) of storing such goods and effects for part or all of the period during which the new place of work continues to be the taxpayer's principal place of work.
(2) Foreign move.
For purposes of this subsection , the term “foreign move” means the commencement of work by the taxpayer at a new principal place of work located outside the United States.
(3) United States defined.
For purposes of this subsection and subsection (i) , the term “United States” includes the possessions of the United States.


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