employed full-time in the area of the new job location for at least 39 of the next 52 weeks.
“I moved from Oregon to Connecticut in 1998,” says Eaton, who certainly passed the distance test. “Therefore, I’m keeping all my records relating to the move so I can show how much I spent on moving household goods, travel costs and temporary lodging.”
If you drive a car from your old home to the new one, you can use 10 cents per mile as your deductible travel cost. Best of all, this is another above-the-line deduction, not subject to any limitations. However, no double dipping is permitted: you can’t deduct expenses that were reimbursed by your employer.
RETIREMENT PLAN ROLLOVER
A job change may also mean moving your employer-sponsored retirement account. The key is to roll over the money from one plan to another, maintaining the tax deferral. Eaton, for example, rolled over her 401(k) account to Coca-Cola’s plan when she joined the company. “She could have rolled the money to an IRA,” says Patricia Stallworth, a Portland, Oregon, financial planner who advises Eaton, “but IRAs are too easy to tap. If your new employer will accept the transfer-and you should check that it will-you’re more likely to keep the money in place until retirement by rolling it into the new plan.”
A home-office deduction can yield significant tax savings, but it’s also one of the IRS’ biggest red flags. Generally, to qualify for a deduction, you use of the business part of your home must be exclusive, regular and for your trade or business; and the business part of your home must be either your principal place of business, a place where you conduct business with clients or a separate structure. (See IRS publication 587 for more specifics.)
In her new home, Eaton plans to claim a home-office deduction. “I use my basement as an office
and not for anything else,” she says. “The basement makes up 12% of the square footage of my home, so I’ll deduct 12% of my housing costs.” If you have an office in your home you can deduct a proportionate share of heating bills, electricity, security monitoring, homeowner’s insurance, repairs and other expenses, including depreciation. Under certain conditions, home-office deductions also are available to renters. If you qualify, you can deduct a proportional amount of your rent. With a 1,000-square-foot apartment, for example, and a 200-square-foot home-office, you may be able to deduct 20% of your rent.
What’s more, if you qualify for home-office deductions, you may be able to write off your car expenses for trips to and from your home. Without a deductible home office, you usually can’t claim the trip from your home to the first business stop of the day or your last trip of the day back home as business use of your car.
A new law makes it easier to take the home-office deduction on your 1999 return, and you can take it even if you earn your money elsewhere. “Now, even if you only