The new tax bill has brought some drastic changes to the potential tax benefits of moving for work. Aside from a few exemptions for military members, moving expenses are no longer deductible, even if you’re moving for a new job or changing locations with your current employer.
The new deduction limit of $10,000 in state and local income and property taxes (or sales and property taxes if you live in a state without income tax) could also impact your post-move tax situation.
There’s also a new limit on mortgage interest deduction, which you can now only take when your mortgage is up to $750,000. The previous limit was $1 million, and remains that high for homes purchased before December 15, 2017. And if you were planning on keeping your home as a rental property, and perhaps taking out a home equity loan or line of credit for a down payment on your new home, the interest won’t be deductible any longer.
What remains unchanged, and can be a significant gain for moving homeowners, is the capital gains exclusion. If you’re a single filer, you can exclude up to $250,000 ($500,000 if you’re married and file jointly) from capital gains taxes if you sell a home that you lived in for at least two of the last five years.
Note that the changes come into effect starting in the 2018 tax year. But if you moved for a job in 2017, you may still be eligible for moving expense deductions on the tax return you’ll file in 2018.
Taxes Aside, What Should You Think About?
While the tax changes are important to keep in mind, and can certainly impact your overall financial situation in the future, there’s more to consider when it comes to personal finances. You’ll want to look at the big picture, not just the new salary or hourly rate, to understand how the change will affect your standard of living.
Estimate Your New Cost of Living
It’s no secret that the cost of living varies depending on where you live.
NerdWallet, a personal finance website, has a cost of living calculator that you could use to compare different cities. It takes into account some of the major costs, such as housing, utilities, transportation, and healthcare. But it also considers more day-to-day expenses that you may otherwise overlook, such as the cost of a gallon of milk or movie ticket.
Taking a closer look at housing costs, HSH.com estimates the salary you’ll need to buy a home in the 50 largest metro areas across the country. And WalletHub analyzed the average monthly energy bills across the country. It breaks down the cost by state, and shows the average cost of electricity, natural gas, home heating oil, and motor fuel.
Negotiate Your New Pay
Knowing your estimated new cost of living can help you create a budget for after you move, and it can be an important part of your negotiations. Companies may adjust their salary bands or pay scale to account for the cost-of-living variations across the country, and you want to be sure your new pay reflects the experience and skills you bring to the table.
Consider how much you’d want to get paid if you didn’t move. Now, compare your current cost of living with your future estimated cost of living, and use the percentage difference to set a base for your compensation.
Also, see if you can have the company help you pay for at least part of your moving expense. Moving long distances can be especially expensive if you’ll be packing and shipping furniture or appliances.
Prepare for Post-Move Expenses as Well
Knowing the difference in cost of living and planning a move is only half the battle. You also need to decide where you’re going to live and whether you plan to rent or buy. Either way, having a good credit score can make the process easier and less expensive.
If you have any friends or colleagues in the area, reach out and ask about different neighborhoods. Living near work and cutting down on your commute could help improve your quality of life. But perhaps an up-and-coming area (that you may not know about from afar) could be a better option.
Then there are all the post-move expenses. Whether it’s a new vehicle, furniture, or other basic necessities, start budgeting now to avoid financing latter.
Moving for work can open up possibilities that aren’t available to you right now. However, you’re also changing three major aspects of your financial life — your income, housing expenses, and cost of living. Preparing ahead of time and understanding the different potential impacts, from taxes to entertainment costs, can help you make the best decision possible.