@austinmshauri I think OP is looking into not having the house counted as an investment property
I think so, too, @annamom. But I think if she rents it and lives elsewhere it may be counted as an investment.
And she wants to take relo expenses on her taxes. Can’t have it both ways. Can’t relo primary residence and then claim old residence is still your primary residence.
When moving for work, there is no option… This is a condition of my offer. I HAVE to move. And since the employer is paying for my relo, I have to write it off the taxes, otherwise I will owe taxes on the money I never saw. The question is how to avoid showing equity in the primary residence I live in now.
If your employer reimburses you or pays directly your fees for moving expenses and those are allowable expenses, they never appear on your taxes. If you have expenses not reimbursed that you can take, those are above the line deductions. If your employer pays you for things that aren’t qualified moving expenses, you will be taxed on those anyway (settling in money, bonus for moving, dyot). You do have to move your primary residence as to take moving expenses there is a test for the number of miles from your old residence to new work place versus the new house to the new work place.
I don’t see a way you can rent out your current residence and still call it your primary residence on FAFSA. By definition, it is no longer your primary residence and just an asset.
No, I’m not planning to rent out my current residence. I asked this question a few weeks ago, and since then it became clear that renting it out is not possible for a number of reasons. My job offer says I can take some cash for miscellaneous relo expenses pre-tax when I move. My concern is that college will claim 40% of that money, unless I write this off the taxes. I don’t have to take it, but I have to move.
So the bottom line - take only pre-tax relo package portion, keep the current residence?
How much aid are we talking about- and how much is 40% that the college is “claiming”?
Are you jumping through hoops for $1200 here? Seems like a lot of hassle for not a lot of payoff… are you eligible for need based aid at this college both with or without the relo package?
If you take cash for the relocation stuff, and it isn’t a qualified expense, you will be taxed on it as income. If not, it won’t count as anything. If it is in your bank account on the day you file fafsa, it will be reported as an asset whether it was taxed as income or received as a relo benefit. Cash in your account is an asseton fafsa day.
For example, my employer paid in (cash) for certain items when we relocated: $150 for a one way airline ticket, 5 days of hotel @$80 per night, a per diem for food. None of this was taxed and if I found a hotel for $40/night the extra was mine to keep, tax free, just likeep any per diem was always tax free when i traveled. On the other hand, if I stayed 10 nights, the rest was mine to pay, and not deductible on taxes because the IRS doesn’t allow that many nights for relo. It is really unlikely you’ll have any taxable items if your employer just pays what the IRS allows. My employer paid the movers directly. I receive a relo cash payment and it was taxed and included in my W2 just as extra income. I don’t think I included any moving expenses on my tax return because it was all paid directly to contractors (moving van, car transport) and anything taxable was on my W2. The rest was a wash. I think I did have 10 or 15 days of hotels, and I got to pay for those.
Several co-workers did what you are doing, kept their primary residence in their old state and rented in the new. Only one was still filling out fafsa, but she had a husband and children living in the old house. I think they got zapped in taxes as we were relocated to Florida (no income taxes) but they filed in California too, so did pay taxes. They also got a much lower COLA adjustment because we went from 18% to 5%.
You have to decided if you are within the tax code to move but to retain your primary residence in the old state. You may want to discuss it with a tax professional.
And as blossom asked, is this all worth it? Are you pell grant eligible? Will having a few thousand in a bank account make a difference (you do get an asset allowance based on your age).
My company ends up fielding a lot of questions from anxious employees over relo allowances and taxes and financial aid and all of that and the vast majority end up in the “Oh never mind” category.
Most people overestimate the amount of aid they think they are getting, so in turn, the bump from the relo allowance takes on a big and worrisome cast in their minds. Once they do the math… AND find out where their kid is actually going to college (remember- nobody gets aid from a hypothetical college, only from an ACTUAL college) it turns out to be not that much of a big deal especially since a very large number of colleges don’t really care how much money you make once you’re out of the Pell category (i.e. not getting any aid other than your Federal loans).
Even if you get a lump sum payment which will be added to your income-- you are under no obligation to have it parked in a checking account the day you file your FAFSA (if in fact you are eligible for aid). You can prepay your property taxes on the primary residence with the money, you can prepay next months mortgage payment.
How much extra financial aid are we talking about???
I think her real question is can she retail her current home as her primary residence and thus not have it counted as an asset and still qualify for the moving expenses paid for by the employer and not taxed as income. That’s a tax question. I know several who did accept the relo as non taxed and yet never changed car registration or licenses. Not saying that was the right tax filing, just that they did it.
Re the insurance issue, if your insurance co quotes a much bigger premium because the house is empty, shop around. Many cos insure second/vacation houses and as long as you or your daughter stay overnight periodically this should qualify. On another note, I have the Arlo home security system that I bought from Best Buy and am very happy with it. I also bought a big outdoor thermometer and in the winter I leave it on my kitchen counter and can view that with my Arlo camera. Cheap way of making sure the furnace hasn’t shut off.
Re insurance:
When we moved half-way across the country, we didn’t sell our house as Happykid was in the area and slept there about half of the time. What we did have to do (per instructions of the mortgage lender) was drop our regular homeowner’s policy and get a “landlord” policy that just covers for the building, not the contents. Our rate went down about 30%. When we moved back after two years, a quick phone call changed the policy back to a regular homeowner’s policy.
@blossom We are discussing about 15K in pre-tax money. Yes, I’m eligible for the need-based aid in that college as long as my pre-tax income doesn’t go up 20% or more. 15% is more than 20% increase. If the college factors this amount in, it will reduce the grant by $5K or more. It is a lot of cash for a single mom who has been out of job for the last 7 months. I took a job with relo out of desperation.
I might be able to explain this to the college as a lump sum payment and not regular income. But it raises my AGI and it is really up to them how they will view it.
I still don’t think you are looking at the moving reimbursement correctly.
Say you make $45k per year. Your employer gives you, outright, $15k in moving allowance. You hire a truck, you drive your car, you stay in an hotel, and all that adds up to $15k. Your income would go up to $60k, you’d write off $15k (above the line) in moving costs. Wash for the AGI.
Say you make $45k and your employer reimburses (or pays outright) for moving costs of $15k. That money is never in your income, and you can’t write anything off. Your income is $45k.
It’s not pre-tax or post tax, it is either deductible as a qualified moving expense or it becomes income if it doesn’t match up with a deductible expense. It really should be a wash unless you are getting a sum as ‘settling in expenses’ or ‘a moving bonus.’ I got one of those, and not only was it taxed as regular income, they withheld 25% (federal tax only) before they gave it to me. If any of it was used for a qualified moving expense (something that wasn’t reimbursed, like the tax to re-register my car) I could take that as a moving expense. The IRS regs don’t really allow for much for moving expenses, like you can’t take a realtor fee or the cost to hem your drapes or the installation fee for cable, so there isn’t much to deduct if your employer has paid for everything. You should look up what you are allowed to deduct before you move and make sure that you either deduct those items or get reimbursed.
I’m voting with Twoin here… I can’t see a scenario where after taxes it’s going to make a difference since I think it’s a wash. Have you made a list of what your actual out of pocket moving costs are going to be, and then checked to see which are actually IRS allowable deductions?
If the moving allowance is the same as the moving expenses, then there should be no extra amount reducing your aid. But if there is money left over, then it might reduce your aid, but you would have that extra money to help pay.
Also if you move this year, then the income from 2017 won’t be used on the aid forms until 2018 for 2019/20 school year. Is your D still in college then?
A bigger impact on aid might be a secondary home, and the equity in that, as well as rental income.