We are moving next month because of a new job. Can we deduct moving expenses?

If you meet three conditions, the answer is yes. First, your new job must be at least 50 miles farther from your prior job. The IRS gives this illustration: “Your old job was three miles from your old home; to meet this test, your new job must be at least 53 miles from your old home.”

Next, your move should be closely related to when you start work. The IRS safe harbor is one year.

Finally, there is a time test. If you are employed, you must work at the new job at least 39 weeks the first year after the move. If you are self-employed, not only must you meet the 39-week requirement but must work full time for a total of at least 78 weeks during the first two years at the new job.

If you meet all three tests, you can deduct such things as packing and shipping your personal belongings; you can also deduct storage costs if that becomes necessary. However, the IRS makes it clear you cannot deduct any part of the purchase price of your new home, the cost of selling your existing residence or the cost of breaking (or entering) a lease.

Talk with your financial advisers. You can also get more information from IRS Publication 521, “Moving Expenses,” which is available free online (www.irs.gov/publications).

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Years ago, we moved to a larger home but decided to rent it out. It has been a successful investment. We are nearing retirement and want to move to Florida in a few years. If we sell the investment property, we will have to pay a lot of capital gains tax. Someone told us we should do a Starker exchange, obtain a house in Florida and then move into it. Is this doable?

Yes, if you follow the rules, that can work. The Starker exchange is named after a Mr. Starker, who sold a property but did not have access to the sales proceeds; they were held in escrow by a neutral party. Later he bought another property and the escrow funds went right into that purchase. Starker claimed he did not have to pay capital gains tax on the sale because he did a Section 1031 “like kind exchange,” which is authorized by the tax code. The court agreed, and that gave birth to the real development of this transaction. Congress was not satisfied with the open-ended transaction in Starker so it amended the law. Now you have to identify the replacement property (or properties) within 45 days from the date the old property (called “relinquished property) is sold and buy the replacement property within 180 days from the date of the earlier sale. If your income tax comes due (April 15) during the 180 days, you either have to get the automatic extension or take title to the replacement property by that date.

Let's say you sold your relinquished property on Jan. 30, 2015, and were able to locate and take title to the replacement property on April 1, 2015. Both properties must be held for investment, but for how long?

Nancy Grekin is an attorney in Hawaii and has written the definitive book on 1031 exchanges. She writes, “When clients want to move into improved 1031 property I recommend they wait at least two years — the longer the better, but after two years it is said by revenue agents to be ‘old and cold.'?”

Why should you consider a 1031 exchange? Contrary to popular belief, it is not a tax-free transaction. But it does defer the tax you would have to pay. Oversimplified, the capital gains tax you save when you do such a Starker exchange will be paid if and when you sell the replacement property.

As always, I cannot provide legal advice, so consult your tax and legal advisers.

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