Question

Due to a merger, Meredith transfers from San Francisco to Little Rock. Under a new job description, she is reclassified from employee to independent contractor status. Her moving expenses, which are not reimbursed, are as follows:

Transportation $1,400
Meals $400
Lodging $500
Cost of moving household goods $4,000
Penalty for breaking lease on San Francisco apartment $3,000
Meredith's deductible moving expense is:
a. $0
b. $5,900
c. $6,100
d. $8,900
e. $9,300

Answer 1

Meredith's deductible moving expense in this scenario would be $6,100. (option c).

Step-by-step explanation:

Meredith's deductible moving expense in this scenario would be $6,100 (option c).

According to the IRS guidelines, to be eligible to deduct moving expenses, an individual must meet the distance test, the time test, and be moving for work purposes. In this case, Meredith meets all these requirements.

Her deductible moving expenses include:

Transportation: $1,400

Meals: $400

Lodging: $500

Cost of moving household goods: $4,000

Penalty for breaking lease on San Francisco apartment: $3,000

When adding up all these expenses, we get a total of $9,300. However, there is a limit to the amount of deductible moving expenses. The IRS provides different limits based on the taxpayer's filing status. For someone who is single, like Meredith, the limit is $6,100. Therefore, her deductible moving expense is $6,100.