International Moving Expenses & Reimbursements

MOVING TO WORK

 Only a United States citizen or resident alien who moves to the area of a new place of work outside the United States or its possessions can deduct allowable expenses for a move outside the United States. The distance and time requirements for moving expenses must also be met and the claim is filed on Form 3903–F.

 Storage expenses are deductible to the extent that they are reasonable expenses of moving personal effects to and from storage, including the reasonable expenses of storing personal effects for all or part of the time the new job location remains the main job location. The new job location must be outside the United States.

 EXCLUDED INCOME

 Moving expenses allocable to excluded foreign income. The part of moving expenses attributable to income excluded under the Foreign Earned Income Exclusion are not deductible (since the related income was excluded from taxable income). Total moving expenses must be allocated on the basis of non-excluded income.

 Expenses which qualify for both moving expenses and business expenses must be claimed in one category or the other, but not both.

REIMBURSEMENT OF MOVING EXPENSES

 Earned income may include reimbursement of expenses of moving. You must include as earned income:

• Any reimbursements of, or payments for, nondeductible moving expenses;
• Reimbursement amounts that exceed your deductible expenses and that you do not return to your employer;
• Any reimbursements made (or treated as made) under a nonaccountable plan, even if they are for deductible expenses; and
• Any reimbursement of moving expenses you deducted in an earlier year.

 Although you receive the reimbursement in one tax year, it may be considered earned for services performed, or to be performed, in another tax year. You must report the reimbursement as income on your return in the year you receive it, even if it is considered earned during a different year.

 If a move is from the United States to a foreign country, the moving expense reimbursement is considered pay for future services to be performed at the new location. The reimbursement is considered earned solely in the year of the move if your tax home is outside the United States and you qualify under the bona fide residence test or physical presence test for at least 120 days during that tax year. If not, the portion of the reimbursement which is taxable in the current year is the proportion of qualifying days in the current year to the total number of days in the year of the move. The difference between the total reimbursement and the amount considered earned in the year of the move is the amount considered earned in the year following the year of the move.

 NON-DEDUCTIBLE EXPENSES

 You cannot deduct the following items as moving expenses.

• Pre-move househunting expenses,
• Temporary living expenses,
• Meal expenses,
• Expenses of buying or selling a home,
• Expenses of getting or breaking a lease,
• Security deposits (including any given up due to the move),
• Home improvements to help sell your home,
• Loss on the sale of your home,
• Mortgage penalties,
• Losses from disposing of memberships in clubs,
• Any part of the purchase price of your new home,
• Real estate taxes,
• Car tags,
• Driver's license,
• Refitting carpets and draperies, and
• Storage charges except those incurred in-transit and for foreign moves.

Mark T. Serbinski Certified Public Accountants and Serbinski Partners PC, Chartered Accountants specialize in situations involving the taxation of U.S. citizens living abroad and Canadians living or working in the United States.  Please contact us for a complimentary initial review of your particular situation on a confidential basis.

Last Update: May 02, 2008    Copyright ©2007 by Serbinski & Associates, Inc., - ALL RIGHTS RESERVED Unauthorized reproduction prohibited. Although we strive to provide accurate and timely information on this site, the information contained herein deals with complex issues in a concise manner, which may cause unintended results if taken out of context, and is therefore intended for general information purposes only. No action should be taken without obtaining prior legal, accounting or other appropriate professional consultation. To ensure compliance with requirements imposed by the Internal Revenue Service, we inform you that any tax advice contained on this web site was not intended or written to be used, and cannot be used, by the recipient (a) for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions and (b) for the purpose of promoting, marketing, or recommending any tax-related matters addressed within to another party.