Moving To Georgia A Tax Guide Updated July 2012
TAX GUIDE FOR MOVING TO GEORGIA PAGE I. INTRODUCTION 1 II. MAULDIN & JENKINS 2 III. ELIGIBILITY TO DEDUCT MOVING EXPENSES 3 IV. DEDUCTIBLE MOVING EXPENSES 4 V. DEDUCTIBLE LIMITS 5 VI. HOW TO REPORT MOVING EXPENSES 6 VII. SELLING YOUR HOME 7-9 VIII. REPORTING THE SALE OF YOUR OLD HOME 10 IX. GEORGIA 11-13 OUR OFFICE LOCATIONS 14
I. TAX ASPECTS OF MOVING Americans are always on the move. Whether your move is a start of a career, a job promotion, a job transfer, a new career opportunity or retirement -- welcome to Georgia! This publication presents some of the Federal and Georgia tax aspects of moving. Although you will gain insight toward the tax aspects of your move, you should not regard this as a complete guide. Consult your tax advisor for specific advice regarding your individual situation. 1
II. MAULDIN & JENKINS Mauldin & Jenkins is the largest non-national certified public accounting firm in Georgia. Our Firm consists of 39 partners and approximately 220 professional and clerical staff members divided into four major departments which are Accounting and Audit, Tax, Management Services and Client Accounting Services. We practice through five offices located in Albany, Atlanta, Macon, Georgia, Birmingham, Alabama, and Bradenton, Florida. Mauldin & Jenkins operates as a partnership with a "one-firm" approach to our practice. Because we operate as one firm, our entire base of resources is available to each of our clients. We believe this practice enables us to provide our clients with the best possible service. We are proud of our reputation and proud of our people. We offer our clients the services they would expect from a large national firm, with the close, personal attention associated with a local firm. We welcome your inquiries. 2
III. ELIGIBILITY TO DEDUCT MOVING EXPENSES If you have changed job locations or started a new job, you may be able to deduct your moving expenses above the line in computing adjusted gross income. To be deductible, the moving expenses must be connected with: 1. Starting work at your new job location, 2. Your new job location must be 50 miles farther from your former home than your old job, 3. You must work full time for at least 39 weeks during the first twelve months after you arrive in the general area of your new job location, and 4. The moving expenses must be incurred within one year from the date you begin work at your new location. You may deduct your moving expenses even if you have not met the time test by the date your return is due. If you subsequently do not meet the time test, an amended return must be filed. SELF-EMPLOYED PERSONS If you are self-employed, you must work full-time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks during the first 24 months after you arrive in the area of your new job location. For purposes of the moving expense deduction, a self-employed individual is one who performs personal services as the owner of an entire interest in an unincorporated trade or business or a partner in a partnership carrying on a trade or business. If you are a semi-retired individual, part-time student or other similarly situated self-employed taxpayer who works only a few hours a week, you are not considered to be a self-employed individual. 3
IV. DEDUCTIBLE MOVING EXPENSES The allowable deductible moving expenses are: 1. Traveling to your new home. 2. Moving household goods and personal items. TRAVELING TO YOUR NEW HOME You may deduct those expenses directly attributable to traveling to your new home (side trips for sightseeing along the way are not deductible). An example of those expenses is the cost of transportation and lodging for yourself and those members of your household. Meals are not excludable as a moving expense, but may be deductible as an employee business expense. If the cost of your meals is totally reimbursed by your employer, 100 percent of the cost is deductible. If not reimbursed by your employer for meals, you are subject to a 50 percent limit of the cost of meals. You may deduct either the actual auto expenses by keeping an accurate record or deduct 23 cents (for 2012) a mile (shortest, most direct route) and parking fees and tolls. You may not deduct repairs, insurance, depreciation or general maintenance. Expenses for all members of your household are deductible, but not expenses for tenants or employees of your household unless you may claim them as a dependent. Also allowable are lodging expenses you incurred in the area of your former home within one day after your furniture has been moved. HOUSEHOLD GOODS AND PERSONAL EFFECTS You may deduct the cost of packing, crating and transporting your household goods and personal effects and those of the members of your household (as defined above). Also deductible is the cost of storing and insuring household goods within any 30-day period after the day your things are moved from your former home and before they are delivered to your new one. The cost of shipping your car and your household pets is also deductible. 4
V. DEDUCTIBLE LIMITS The expenses of moving household goods and traveling to your new home are not limited to any amount. You may not take a moving expense deduction and a business expense deduction for the same expenses. You must determine if your expenses are deductible as moving expenses or as business expenses. FOREIGN AND MILITARY MOVES The expenses of a return trip to the United States are subject to the standard moving expense deduction rules as discussed above. Consult your tax advisor if you are moving to a foreign country, if you retired while working abroad, or if your move is military related. 5
VI. HOW TO REPORT MOVING EXPENSES Your employer should include the amount of moving expenses on your W-2 and identify them as such. Moving expenses are reported on Federal Form 3903 and the allowable deduction is taken as an above-the-line deduction subtracted from gross income. Reimbursement income or payments for moving must be reported in the year they are received. You may want to deduct the moving expenses in the same year as you receive the reimbursement. A taxpayer must substantiate underlying amounts related to the moving expense deduction and should retain all records, receipts and canceled checks related to the deductions. TAX WITHHOLDING ON REIMBURSEMENTS Your employer is not required to withhold income tax or Social Security tax on allowances or reimbursements for moving expenses if he believes you will be able to deduct the expenses. This means that at the time your employer pays you the reimbursement or allowance, he believes you will meet the distance and time tests, and that your expenses will be deductible. If you are reimbursed for nondeductible moving expenses or do not meet either the distance or time test, your employer is required to withhold income tax and Social Security tax. See IRS publication #521 Moving Expense for further guidance. 6
VII. SELLING YOUR HOME EXCLUSION OF GAIN You may exclude from income up to $250,000 of gain realized on the sale or exchange of a residence. The exclusion increases to $500,000 for joint filers. You may elect out of the provision. The exclusion applies to only one sale or exchange every two years, but pre-may 7, 1997 sales are not taken into account. You must have owned and occupied the residence as a principal residence for an aggregate of at least two of the five years before the sale or exchange. The required two years of ownership and use need not be continuous. The test is met if you owned and used the property as a principal residence for a total of 730 days (365 x 2) during the five-year period before the sale. Short temporary absences for vacations or seasonal absences are counted as periods of use, even if you rent out the property during those periods. However, an absence of an entire year is not considered a short temporary absence. The ownership and use tests may be met at different times (i.e., during different two-year periods), provided that both tests are met during the five-year period before the date of sale. The law does not require that the home sold had been your principal residence at the time of purchase or sale--only that your use of the home as a principal residence total two years or more within the five-year period ending on the date of sale. For example, you could move into your vacation home, converting it into your new principal residence, while having up to three more years to sell your old principal residence to take advantage of the exclusion. If you do not meet the ownership or residence requirements, a pro rata amount of the exclusion is excludable if the sale or exchange is due to a change in place of employment, health, or unforeseen circumstances. In such cases, the amount of the available exclusion is equal to the amount of the applicable exclusion ($250,000 or $500,000) multiplied by the portion that the shorter of (1) the aggregate periods during which the ownership and use requirements were met during the five-year period ending on the date of sale or (2) the period after the date of the most recent sale or exchange to which the exclusion applied, bears to two years. The circumstances under which the exclusion may be prorated due to a sale or exchange involving unforeseen circumstances is to be determined by IRS regulations. DETERMINATION OF BASIS IN YOUR HOME Whether you bought your home, hired a contractor to build it for you, built it yourself or received it another way, it is important that you know its basis. The basis is used to figure gain or loss when you sell or otherwise dispose of your home. 7
The original basis of a home is the purchase price in addition to certain settlement or closing costs. If you contracted to have your house built on land that you own, your basis is the land basis plus the amount it cost you to complete the house. This includes the cost of labor and materials, amounts paid the contractor, architect fees, building permit charges, utility meter and connection charges and legal fees that are directly connected with building your home. If you built all or part of your house yourself, its original basis is the total amount it cost you to complete. You increase your basis by the cost of improvements, additions and other capital items. You also may add assessments for local benefits, such as streets and sidewalks. You must reduce the basis by any deductible losses from fire or other casualty, payments you receive for any easements or rightof-way you give up and any depreciation you claimed. You may not add to your basis certain settlement fees or closing costs such as points, fire insurance premium, mortgage insurance premiums or charges for services concerning occupancy of the house. If you used any portion of your house for business purposes, consult your tax advisor. Improvements add to the value of your home, prolong its useful life or adapt it to new uses. Improvements, which you add to the basis of your property, should not be confused with repairs, which you do not add to the basis. However, if items would otherwise be considered repairs are done as part of an extensive remodeling or restoration of your home, the entire job is considered an improvement. You should save receipts and other records for all improvements, additions and other items that affect the basis of your home. Keep them for at least three years after the year you sell or otherwise dispose of your home. SELLING PRICE OF OLD HOME Your gain on the sale of your home is the sales price net of certain expenses less the adjusted basis. The selling price is the total amount you receive for the property, including money, all notes, mortgages or other debts that are part of the sale, and the fair market value of other property you receive. Selling expenses include commissions, advertising and legal fees. Loan charges paid by the seller, such as loan placement fees or points, are usually a selling expense. The selling price less selling expense is the adjusted sales price. In computing the amount of gain to be postponed, fixing-up expenses may be deducted. 8
Fixing-up expenses must meet the following: 1. Be from work done during the 90-day period ending on the day you sign the contract to sell. 2. Be paid within 30 days after the sale. 3. Not be deductible in arriving at your taxable income. 4. Not be used in figuring the amount realized. 5. Not be capital expenditures or improvements. Again, you consider fixing-up expenses only in considering the gain on which tax is postponed. You may not deduct them in figuring the actual profit on the sale of the home. 9
VIII. REPORTING THE SALE OF YOUR OLD HOME You do not report the sale of your home if the gain is totally excludable. If any of the gain is taxable, report the sale on Schedule D. See IRS publication #523 Selling Your Home for further guidance. 10
IX. GEORGIA Georgia conforms with the Federal income tax rules; thus, the moving expense deduction will be the same as the Federal and will require no adjustment if you are moving into Georgia. You are required to file a Georgia income tax return if you are required to file a Federal return or if you have taxes withheld from your wages. RESIDENT OR NONRESIDENT? You are either a resident, a part-year resident or nonresident for Georgia income tax purposes. If you are a resident, file the resident Form 500 and report all your income as though you were a resident for the entire year. You will be allowed a credit for income taxes paid to another state. If you are a nonresident, file the nonresident Form 500. You will be taxed only on income earned in Georgia and will prorate your deductions and exemptions. If you are a part-year resident, you will file Form 500. You will be taxed only on the income earned in Georgia or paid to you after you have moved to Georgia and will prorate your deductions and exemptions. ONE SPOUSE IS A RESIDENT, THE OTHER IS NOT If you file a joint Federal return, you may file separately in Georgia. If you file separate Federal returns, you may file joint Georgia returns. INCOME NOT TAXABLE TO GEORGIA RESIDENTS Georgia does not take the following income: Interest from US Obligations (such as US Savings Bonds, Treasury Notes and Bills, etc.) Interest from bonds of Georgia governmental authorities Social Security and/or railroad retirement income 11
Georgia grants a $35,000 exclusion for each taxpayer over age 62 or who are permanently disabled for: Federal civil service retirement pay Police officers, firefighters or income from Georgia retirement system Military retirement pay Qualified retirement income (IRA, SEP and KEOGH) Unearned income (dividends, interest, annuities, rents) Earned income not to exceed $4,000 INCOME WHICH IS TAXABLE TO GEORGIA Municipal interest on obligations of states and political subdivisions other than Georgia is taxable. Georgia does not allow the itemized deduction for state and local income taxes, but does allow a deduction for Georgia income taxes. GEORGIA TAX RATES AND CREDITS Individual income tax is a graduated tax with a minimum rate of 6 percent. The rate differs depending on filing status. Georgia allows a credit for taxes paid to another state and other business and jobs tax credits. ESTIMATED TAX Generally, you should make estimated tax payments if you figure your gross income from sources other than wages to be $1,000 or more and you do not have adequate withholdings from your salary, pension or other income. SALES TAX Georgia taxes tangible sales at the rate of 4 percent. Local sales taxes may increase this rate. 12
INTANGIBLE TAX Georgia does not tax intangible assets. PROPERTY TAX The real estate tax is based on 40 percent of market value of your residence and on the millage rate of the local government. The homestead exemption is $10,000. Georgia's personal property tax for automobiles is based on the fair market value of the automobile and the tax rate of the district in which you live. ESTATE AND GIFT TAX Georgia does not have an estate, gift, or inheritance tax. 13
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