My company paid me a lump sum relocation amount(A) and also taxes on it (amount B). Both A&B are included in my W-2 under box 1. Can I deduct this amount as moving expense while filing my tax return ? What if my actual expense(amount C) of moving/shifting/travelling etc was less than amount A, can I still deduct amount A & B as moving expense or if I can only deduct amount C as my moving expense ? Does IRS asked for the proof of actual expense ?
Because you are being taxed on your reimbursement, your relocation amount was simply a bonus for tax purposes. You can deduct all qualified moving expenses (it's when you are reimbursed before tax, that things get complicated).
The software will ask you about all your moving expenses and have blue hyperlinks to more information for the qualifications and expenses you can deduct.
You do not need to include proof of each expense to the IRS, when submitting your return. It's not standard for the IRS to request this information either.
However, proof of your deduction can be requested, so you should have detailed records for the amount of your moving expense deduction. This could be made of:
Hey thanks a lot for such a speedy response.... so to be precise in my example it is amount A which I got in my bank account as relocation, my company also paid the taxes on it which is amount B, and it is amount C which I actually spent for my move (C is less than A). What amount shall I be able to deduct as moving expense in my tax return ? Amount A, or Amount A&B, or Amount C ? For proof I have my amount A mentioned in my offer letter as relocation amount, I have salary Slip of amount A&B, & I have receipts of my move expense for amount C. Just a note that my move was international i.e. I moved from India to US(NJ) for my job, not sure if that impacts anyways my moving expense deduction. Appreciate your help and guidance on this.
You are most welcome.
You can deduct all of C.
A and B, do not matter because it wasn't *actually* a reimbursement (for taxes). You weren't reimbursed BEFORE tax.
You were paid more. All of your qualified expenses can be deducted.
The software asks you about all of the requirements to be sure you qualify and walks you through everything you can deduct. Click on the small blue hyperlinks on each page for a pop up box with more information. This is a pretty easy deduction to qualify for as long as you moved for a job.