Tax Tips from Jack Spellerberg CPA
Moving Expenses May Be Deductible
Taxpayers may be able to deduct certain expenses of moving to a new home because they started or changed job locations. Use Form 3903, Moving Expenses, to claim the moving expense deduction when filing a federal tax return.
Home means the taxpayer’s main home. It does not include a seasonal home or other homes owned or kept up by the taxpayer or family members. Eligible taxpayers can deduct the reasonable expenses of moving household goods and personal effects and of traveling from the former home to the new home.
Reasonable expenses may include the cost of lodging while traveling to the new home. The unreimbursed cost of packing, shipping, storing and insuring household goods in transit may also be deductible.
Who Can Deduct Moving Expenses?
- The move must closely relate to the start of work. Generally, taxpayers can consider moving expenses within one year of the date they start work at a new job location.
- The distance test. A new main job location must be at least 50 miles farther from the employee’s former home than the previous job location. For example, if the old job was three miles from the old home, the new job must be at least 53 miles from the old home. A first job must be at least 50 miles from the employee’s former home.
- The time test. After the move, the employee must work full-time at the new job for at least 39 weeks in the first year. Those self-employed must work full-time at least 78 weeks during the first two years at the new job site.
Different rules may apply for members of the Armed Forces or a retiree or survivor moving to the United States.
Here are a few more moving expense tips from the IRS:
Reimbursed expenses. If an employer reimburses the employee for the cost of a move, that payment may need to be included as income. The employee would report any taxable amount on their tax return in the year of the payment.
Nondeductible expenses. Any part of the purchase price of a new home, the cost of selling a home, the cost of entering into or breaking a lease, meals while in transit, car tags and driver’s license costs are some of the items not deductible.
Recordkeeping. It is important that taxpayers maintain an accurate record of expenses paid to move. Save items such as receipts, bills, canceled checks, credit card statements, and mileage logs. Also, taxpayers should save statements of reimbursement from their employer.
- Address Change. After any move, update the address with the IRS and the U.S. Post Office. To notify the IRS file Form 8822, Change of Address.
Tips to Keep in Mind for Taxpayers Traveling for Charity
During the summer, some taxpayers may travel because of their involvement with a qualified charity. These traveling taxpayers may be able to lower their taxes.
Here are some tax tips for taxpayers to use when deducting charity-related travel expenses:
- Qualified Charities. For a taxpayer to deduct costs, they must volunteer for a qualified charity. Most groups must apply to the IRS to become qualified. Churches and governments are generally qualified, and do not need to apply to the IRS. A taxpayer should ask the group about its status before they donate. Taxpayers can also use the Select Check tool on IRS.gov to check a group’s status.
- Out-of-Pocket Expenses. A taxpayer may be able to deduct some of their costs including travel. These out-of-pocket expenses must be necessary while the taxpayer is away from home. All costs must be:
- Directly connected with the services,
- Expenses the taxpayer had only because of the services the taxpayer gave, and
- Not personal, living or family expenses.
- Genuine and Substantial Duty. The charity work the taxpayer is involved with has to be real and substantial throughout the trip. The taxpayer can’t deduct expenses if they only have nominal duties or do not have any duties for significant parts of the trip.
- Value of Time or Service. A taxpayer can’t deduct the value of their time or services that they give to charity. This includes income lost while the taxpayer serves as an unpaid volunteer for a qualified charity.
- Travel Expenses a Taxpayer Can Deduct. The types of expenses a taxpayer may be able to deduct include:
- Air, rail and bus transportation,
- Car expenses,
- Lodging costs,
- Cost of meals, and
- Taxi or other transportation costs between the airport or station and their hotel.
- Travel Expenses a Taxpayer Can’t Deduct. Some types of travel do not qualify for a tax deduction. For example, a taxpayer can’t deduct their costs if a significant part of the trip involves recreation or vacation.
Tips to Keep in Mind on Income Taxes and Selling a Home
Homeowners may qualify to exclude from their income all or part of any gain from the sale of their main home.
Below are tips to keep in mind when selling a home:
Ownership and Use. To claim the exclusion, the homeowner must meet the ownership and use tests. This means that during the five-year period ending on the date of the sale, the homeowner must have:
- Owned the home for at least two years
- Lived in the home as their main home for at least two years Gain. If there is a gain from the sale of their main home, the homeowner may be able to exclude up to $250,000 of the gain from income or $500,000 on a joint return in most cases. Homeowners who can exclude all of the gain do not need to report the sale on their tax return
Loss. A main home that sells for lower than purchased is not deductible.
Reporting a Sale. Reporting the sale of a home on a tax return is required if all or part of the gain is not excludable. A sale must also be reported on a tax return if the taxpayer chooses not to claim the exclusion or receives a Form 1099-S, Proceeds from Real Estate Transactions.
- Taxpayers who own more than one home can only exclude the gain on the sale of their main home. Taxes must paid on the gain from selling any other home.
- Taxpayers who used the first-time homebuyer credit to purchase their home have special rules that apply to the sale. For more on those rules, see Publication 523. Use the First Time Homebuyer Credit Account Look-up to get account information such as the total amount of your credit or your repayment amount.
- Work-related moving expenses might be deductible, see Publication 521, Moving Expenses.
- Taxpayers moving after the sale of their home should update their address with the IRS and the U.S. Postal Service by filing Form 8822, Change of Address.
- Taxpayers who purchased health coverage through the Health Insurance Marketplace should notify the Marketplace when moving out of the area covered by the current Marketplace plan.
Avoid scams. The IRS does not initiate contact using social media or text message. The first contact normally comes in the mail. Those wondering if they owe money to the IRS can view their tax account information on IRS.gov to find out.
Helpful Tips to Know About Gambling Winnings and Losses
Taxpayers must report all gambling winnings as income. They must be able to itemize deductions to claim any gambling losses on their tax return.
Taxpayers who gamble may find these tax tips helpful:
- Gambling income. Income from gambling includes winnings from the lottery, horseracing and casinos. It also includes cash and non-cash prizes. Taxpayers must report the fair market value of non-cash prizes like cars and trips to the IRS.
- Payer tax form. The payer may issue a Form W-2G, Certain Gambling Winnings, to winning taxpayers based on the type of gambling, the amount they win and other factors. The payer also sends a copy of the form to the IRS. Taxpayers should also get a Form W-2G if the payer withholds income tax from their winnings.
- How to report winnings. Taxpayers must report all gambling winnings as income. They normally should report all gambling winnings for the year on their tax return as “Other Income.” This is true even if the taxpayer doesn’t get a Form W-2G.
- How to deduct losses. Taxpayers are able to deduct gambling losses on Schedule A, Itemized Deductions, but keep in mind, they can’t deduct gambling losses that are more than their winnings.
- Keep gambling receipts. Keep records of gambling wins and losses. This means gambling receipts, statements and tickets or by using a gambling log or diary.
Gambling Losses Up to the Amount of Gambling Winnings
You must report the full amount of your gambling winnings for the year on Form 1040, line 21. You deduct your gambling losses for the year on Schedule A (Form 1040), line 28. You can’t deduct gambling losses that are more than your winnings. Generally, nonresident aliens can’t deduct gambling losses on Schedule A (Form 1040NR).
You can’t reduce your gambling winnings by your gambling losses and report the difference. You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. Therefore, your records should show your winnings separately from your losses.
Diary of winnings and losses. You must keep an accurate diary or similar record of your losses and winnings.
Your diary should contain at least the following information.
The date and type of your specific wager or wagering activity.
The name and address or location of the gambling establishment.
The names of other persons present with you at the gambling establishment.
The amount(s) you won or lost.
Proof of winnings and losses. In addition to your diary, you should also have other documentation. You can gen-erally prove your winnings and losses through Form W-2G, Certain Gambling Winnings; Form 5754, State-ment by Person(s) Receiving Gambling Winnings; wager-ing tickets; canceled checks; substitute checks; credit re-cords; bank withdrawals; and statements of actual winnings or payment slips provided to you by the gam-bling establishment.
For specific wagering transactions, you can use the fol-lowing items to support your winnings and losses.
These recordkeeping suggestions are intended as general guidelines to help you establish your winnings and losses. They aren’t allinclusive. Your tax liability depends on your particular facts and circumstances.
Keno. Copies of the keno tickets you purchased that were validated by the gambling establishment, copies of your casino credit records, and copies of your casino check cashing records.
Slot machines. A record of the machine number and all winnings by date and time the machine was played.
Table games (twenty-one (blackjack), craps, poker, baccarat, roulette, wheel of fortune, etc.). The number of the table at which you were playing. Casino credit card data indicating whether the credit was issued in the pit or at the cashier’s cage.
Bingo. A record of the number of games played, cost of tickets purchased, and amounts collected on winning tickets. Supplemental records include any receipts from the casino, parlor, etc.
Racing (horse, harness, dog, etc.). A record of the races, amounts of wagers, amounts collected on winning tickets, and amounts lost on losing tickets. Supplemental records include unredeemed tickets and payment records from the racetrack.
Lotteries. A record of ticket purchases, dates, winnings, and losses. Supplemental records include unredeemed tickets, payment slips, and winnings
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