Tax credits for interns

[Gnocchi Monster]

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I'm trying to get any credit I can for this year. As my med school is ******ed, it made us pay 2015 spring semester tuition in 2014, therefore I'm not eligible for the lifetime learning credit or tuition deduction credits. However, since I was a full-time student for that part of the year, I'm also missing out on the saver's credit for 2015. I am getting loan interest deductions. Sound about right? Any other credits pop into yall's minds?

 

[RangerBob]

Sounds right to me--I was in the same boat. Had my school collected tuition just a few days later then I would've gotten all of my federal witholdings back.

I think the only deductions I got were student loan interest and moving.

 

[donkeykong1]

Sounds right to me--I was in the same boat. Had my school collected tuition just a few days later then I would've gotten all of my federal witholdings back.

I think the only deductions I got were student loan interest and moving.

how does one deduct moving costs exactly? do realtor costs, gas, tolls count?

 

[RangerBob]

how does one deduct moving costs exactly? do realtor costs, gas, tolls count?

Honestly, you deduct moving expenses by just typing the numbers into your H&R or TT tax return...

The details all laid out nicely on tax websites, but briefly you more or less have to move 50 miles away (to be exact, the commute form your OLD home to your NEW job has to be at least 50 miles longer than your OLD commute--ie., if your old commute was 20 miles, your new commute would have to be at least 70 miles from that same home).

You can deduct packing costs (I think even the costs of boxes counts), transportation costs (gas and/or airfare, moving truck, cost of hiring movers), insuring your belongings during the move. You cannot deduct the costs of driving out to look at homes. I'm 99.9% sure you can't deduct the cost of a realtor, but I never looked into it. I'm not sure why you would be able to though--you don't actually need a realtor to move (you can rent, or buy directly from the homeowner, etc.), whereas you do need to pay to transport yourself and your belongings (if you have any) to your new home. I think that's more-or-less how the IRS views it.

Of course, that kind of begs the question of why you can deduct the cost of paying someone to move your stuff when that's not totally necessary (if you're young and healthy, you can just rent a U-Haul and grab a few buddies to move everything). But I'm sure lobyists and politicians argued a couple days over that.

You claim this deduction in the tax year you move (ie, if you move this coming July 2016, then you claim the deduction on your 2016 tax return), but if you don't end up satisfying the requirements (working at least 39 weeks of the 12-month that starts the day you move to your new location) then you're supposed to reverse the deduction on your 2017 taxes.

It's quite a nice deduction. Remember--deductions are far better than credits!

 

[bc65]

It's quite a nice deduction. Remember--deductions are far better than credits!

Credits are better than deductions. A credit of $100 means you get $100 off your tax bill.
A deduction is less valuable. A deduction of $100, if for example you're in a 30% marginal bracket, means you save $30 off your taxes.

-you don't actually need a realtor to move

More important is that real estate brokers charge the seller, not the buyer. However, you shouldn't buy a house until you have been in a job for several years and you know for sure that you're going to stay.

Now, if you were using a rental broker to find you a rental in a big city, you might be charged a fee. I don't think that would be deductible, but you could look into it.

Of course, that kind of begs the question of why you can deduct the cost of paying someone to move your stuff when that's not totally necessary

If you're a student, and you're young and healthy, and all you own is a few boxes of books and a couple of pots and pans, it takes a U-haul and a few hours. When you'll have actual possessions, or move a few thousand miles, you will see why you need movers. I moved furniture for a moving company in college. It can take 5 professionals 5 to 12 hours to load up a huge tractor-trailer. It can take an entire day for two guys to pack up a house. You need specialists to move pianos.

NOTE: Furniture movers are a huge source of complaints and lawsuits. Be advised that local moves are charged per worker per hour. The estimate is not binding, and is often meaningless. Just find out what you'll be charged per hour, and be prepared to pay considerably more than what was quoted. The job may take longer than they thought, or more likely, they underestimated the hours to get the job. On my last move, the company sent a medium sized truck and 4 guys. Fortunately, I was only moving 15 minutes away, because their estimate was off and they had to drive back and load the truck twice. They worked all day until midnight.

For interstate moves, there's a federally-fixed list of fees. You pay based on the weight of your possessions in the truck, multiplied by miles moved. There are fees based on the distance from the curb to the house, the number of steps that need to be climbed, etc. Here too, there are lots of complaints because the bill is often much higher than what was quoted. However, as the customer, remember that the bill would be the same regardless of who did the move. So just make sure you can afford more than what you were quoted. Personally, I have moved cross country 3 times, and never had any problems. There were also no surprises because I understood the system.

 

[RangerBob]

Credits are better than deductions. A credit of $100 means you get $100 off your tax bill.
A deduction is less valuable. A deduction of $100, if for example you're in a 30% marginal bracket, means you save $30 off your taxes.

You're right--I was sleepy and should've just said "tax deductions are great! and left it at that." One advantage of the deduction however is it does lower your AGI, which results in a slightly lower IBR/PAYE payment. But yes, tax credits are better.

Good advice on the movers. Our experience with a professional company was pretty terrible and since then we've just used a medium U-Haul and hired loaders/unloaders through U-Haul's "movinghelp.com" website and had great experiences with that. It's generally taken a group of two about 2-4 hours to move in or out of a 2-3 bedroom home with basement. It probably helps we have no pianos or huge pieces of furniture, and that the house I live in now is smaller than some residents' apartments.

Still, it's a big change from college where I fit everything I owned in the back of my car.

 

[dpmd]

Details from the IRS on moving expenses
Deductible Moving Expenses
If you meet the requirements discussed earlier under Who Can Deduct Moving Expenses, you can deduct the reasonable expenses of:

• Moving your household goods and personal effects (including in-transit or foreign-move storage expenses), and
  
  
• Traveling (including lodging but not meals) to your new home.

You cannot deduct any expenses for meals.
Reasonable expenses. You can deduct only those expenses that are reasonable for the circumstances of your move. For example, the cost of traveling from your former home to your new one should be by the shortest, most direct route available by conventional transportation. If during your trip to your new home, you stop over, or make side trips for sightseeing, the additional expenses for your stopover or side trips are not deductible as moving expenses.
Example.

Beth's employer transferred her from Boston, Massachusetts, to Buffalo, New York. On her way to Buffalo, Beth drove into Canada to visit the Toronto Zoo. Since Beth's excursion into Canada was away from the usual Boston-Buffalo route, the expenses paid or incurred for the excursion are not deductible. Beth can only deduct what it would have cost to drive directly from Boston to Buffalo. Likewise, Beth cannot deduct any expenses, such as the cost of a hotel room, caused by the delay for sightseeing.

Travel by car. If you use your car to take yourself, members of your household, or your personal effects to your new home, you can figure your expenses by deducting either:

• Your actual expenses, such as the amount you pay for gas and oil for your car, if you keep an accurate record of each expense, or
  
  
• The standard mileage rate of 23 cents per mile.
  

Whether you use actual expenses or the standard mileage rate to figure your expenses, you can deduct the parking fees and tolls you pay to move. You cannot deduct any part of general repairs, general maintenance, insurance, or depreciation for your car.
Member of your household. You can deduct moving expenses you pay for yourself and members of your household. A member of your household is anyone who has both your former and new home as his or her home. It does not include a tenant or employee, unless that person is your dependent.
Moves to Locations in the United States
If you meet the requirements under Who Can Deduct Moving Expenses, earlier, you can deduct expenses for a move to the area of a new main job location within the United States or its possessions. Your move may be from one U.S. location to another or from a foreign country to the United States.

Household goods and personal effects. You can deduct the cost of packing, crating, and transporting your household goods and personal effects and those of the members of your household from your former home to your new home. For purposes of moving expenses, the term “personal effects” includes, but is not limited to, movable personal property that the taxpayer owns and frequently uses. If you use your own car to move your things, see Travel by car, earlier. You can deduct any costs of connecting or disconnecting utilities required because you are moving your household goods, appliances, or personal effects. You can deduct the cost of shipping your car and your household pets to your new home. You can deduct the cost of moving your household goods and personal effects from a place other than your former home. Your deduction is limited to the amount it would have cost to move them from your former home.
Example.

Paul Brown has been living and working in North Carolina for the last 4 years. Because he has been renting a small apartment, he stored some furniture at his parents' home in Georgia. Paul got a job in Washington, DC. It cost him $900 to move the furniture from his North Carolina apartment to Washington and $3,000 to move the stored furniture from Georgia to Washington. It would have cost $1,800 to ship the stored furniture from North Carolina to Washington. He can deduct only $1,800 of the $3,000 he paid. The amount he can deduct for moving his furniture is $2,700 ($900 + $1,800).

You cannot deduct the cost of moving furniture you buy on the way to your new home.
Storage expenses. You can include the cost of storing and insuring household goods and personal effects within any period of 30 consecutive days after the day your things are moved from your former home and before they are delivered to your new home.
Travel expenses. You can deduct the cost of transportation and lodging for yourself and members of your household while traveling from your former home to your new home. This includes expenses for the day you arrive. The day of arrival is the day you secure lodging at the new place of residence, even if the lodging is on a temporary basis. You can include any lodging expenses you had in the area of your former home within one day after you could no longer live in your former home because your furniture had been moved. The members of your household do not have to travel together or at the same time. However, you can only deduct expenses for one trip per person. If you use your own car, see Travel by car, earlier.
Example. In February 2015, Josh and Robyn Black moved from Minneapolis to Washington, DC, where Josh was starting a new job. Josh drove the family car to Washington, DC, a trip of 1,100 miles. His expenses were $253 for mileage (1,100 miles x 23 cents per mile) plus $40 for tolls and $150 for lodging, for a total of $443. One week later, Robyn flew from Minneapolis to Washington, DC. Her only expense was her $400 plane ticket. The Blacks' deduction is $843 (Josh's $443 + Robyn's $400).

Nondeductible Expenses
You cannot deduct the following items as moving expenses.

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

 

[dpmd]

Nice thing is that you don't have to itemize deductions in order to claim moving expenses.

 

[donkeykong1]

Nice thing is that you don't have to itemize deductions in order to claim moving expenses.

are student loans and moving costs both standard deductions?

 

[dpmd]

are student loans and moving costs both standard deductions?

They both are put directly on the 1040 to adjust your gross income and then you can either take the standard deduction or itemize (if you have charitable donations, mortgage interest, property taxes, state and local taxes, job expenses above the threshold, child care expenses, medical expenses above the threshold, and some other stuff that aren't typical for residents or likely to be better than the standard).

 

[donkeykong1]

They both are put directly on the 1040 to adjust your gross income and then you can either take the standard deduction or itemize (if you have charitable donations, mortgage interest, property taxes, state and local taxes, job expenses above the threshold, child care expenses, medical expenses above the threshold, and some other stuff that aren't typical for residents or likely to be better than the standard).

so basically if you estimate to do over ~6k in deductions do an itemized right

 

[dpmd]

so basically if you estimate to do over ~6k in deductions do an itemized right

Not counting the student loan interest or moving expenses, i think so (married is close to 12k for the standard so single is probably half that).

 

[bc65]

are student loans and moving costs both standard deductions?

You're using the term "standard deductions" incorrectly, and it's important to understand the term.


To clarify: There are two types of deductions: Above the line and below the line.

Above the line deductions include student loan interest, moving expenses, contributions to health savings account and traditional IRAs, some tuition expenses, and a few others. Those are deducted "above the line", which means that you take those deductions regardless of whether or not you itemize deductions.

After you have taken those deductions, and possibly a few more from a short list, you are left with your AGI, adjusted gross income.

Then you move "below the line."

Below the line is where you choose between either the "standard deduction", which is $6300 single, $12,600 married, or "itemized deductions". The biggest itemized deductions here are charity, mortgage interest, taxes paid (real estate tax, state income tax, etc ), and miscellaneous expenses, which have to exceed 2% of your gross income to count. Unless you own a house and /or give a lot of money to charity, you are very unlikely to exceed the standard deduction, so you should just take the standard deduction and not itemize.

As you can see, student loan interest and moving expenses are both "above the line" and don't have any effect on whether or not you take the standard deduction.