As we close in on a pair of jobs, the nitty-gritty details of this complicated life-event are coming out. Today, I am focused on a line-item in our contract negotiations: the moving allowance.
This benefit has been a fixture of the recruitment package for young doctors for quite some time. I have observed many of my friends who signed contracts in previous years gleefully avoid the chore of moving their own stuff, and reassure us that we wouldn’t have to deal with the headaches, and backaches, of relocating all our stuff.
And then, in 2017, our congress passed the “Tax Cuts and Jobs Act.” This euphemistically named bill did many things, among them was to eliminate moving expenses as a deduction beginning in 2018.
In preparation for this post, I read through IRS Publication 521 , detailing the deductions allowed in past years. I thought that it was a very reasonable set of rules. Moving for a job is expensive, and these expenses aren’t things on which we would voluntarily spend our paycheck. Particularly for resident physicians completing government-subsidized training, and now looking to serve society as a major, essential, part of the healthcare industry, it would make sense that the expenses incurred in the process should be deducted from our taxable income, no?
The “Tax Cuts” architects declared that we don’t deserve a break for moving. Ok, maybe I can see their point. I could reduce the moving expenses if I were personally responsible. Should I get a bigger deduction for someone coming over and putting my cookbooks in a box, moving that box to a truck, driving that truck 800 miles, and then putting that box in my new garage, as opposed to me just doing it myself?
The other aspect to this change is that any relocation package that your employer gives to cover this mandatory and cheerless expense is now taxable income. I’ve seen a few contracts at this point, and all of them have offered a relocation package. For simplicity, let’s say that’s $1000. If I spend that $1000 to move, I have to pay taxes on that money. My box of cookbooks represents a quantifiable percentage of that budget; let’s say $1. That means that after taxes it cost $1.25 to move my box of cookbooks.
The question is not if the “Tax Cut” is justified; that’s way beyond my pay-grade. The question now is: Should I move the cookbooks?
Accepting a recruitment package with moving expenses seems rather pointless. I could just ask for a bigger salary or request the money as a sign-on bonus instead. Yes it will be taxable, but it would allow me to make some choices. I could choose not to move the cookbooks. Instead, I could choose to donate or recycle them, then take my taxable cash and either buy new ones, or not. The obvious additional benefit to this plan is that no one has to lift, handle, or haul the cookbooks 800 miles (or wherever, maybe it’s 80 miles. Not telling yet!). Seems like a win-win.
I recently had a consultation with a professional stager to prepare my house for the market. I’ve intentionally cut clutter and try to keep items in their places. I’m working through the Marie Kondo “Lessons,” and I’m particularly proud of my neat and organized closet. However, this lady destroyed me. It was brutal. I found myself struggling to keep up with her, scribbling away notes while simultaneously moving items to the ever growing “edit” pile in the floor and apologizing, “Oh, yeah, um sorry, bought that for our first apartment 12 years ago.” By the end of this appointment, the perimeter of my home looked adorable with sparse little vignettes and cozy furniture groupings, while the middle of the floor was a ransacked pile of shame.
So what should I do with this shame-pile? Should I pay taxes to move it? After this experience and in the context of the new “Tax Cuts,” I’m not only asking myself what sparks joy, but what is worth a 25% tax for the privilege of moving it. Should I pay taxes to move this 3-ring binder? That ill-fitting jacket? Our unread books–gasp?
Of course, I have to consider the cost of moving the item versus the cost of replacing it. If I have to re-purchase an item, obviously I’m going to pay taxes on the income used to purchase said item (~25%)+ sales taxes (~7%), so that would be more like 32%. So the mathematical equation becomes whether it will cost <7% of the replacement cost of the item to move it. And wow, writing it out like that makes me realize, in horror, that to buy something that costs $1, I have to make $1.32! This is why Mr. Money Mustache says, ” cutting your spending rate is much more powerful than increasing your income.” (Also see this classic MMM article).
I feel like this is a good step in the direction of paring down our stuff in case we ever want to make an international move, like the Copelands or the Duponts. It is certainly a good exercise in becoming more deliberate in how I spend my wealth (and yes, I do consider my pampered U.S. Citizen lifestyle wealthy, even on resident salaries). In the coming weeks, I will be exploring the concept of Effective Altruism, realizing that the mundane decisions regarding how we will conduct our move could have real implications on our impact for good in the world.
The bottom line is, I’m planning on letting the moving companies keep their fancy boxes and strong backs. I’ll hoard my Sunbasket boxes for a few months and only put the essentials in them. I’ll sell most of my furniture, and fit what will into another U-Haul trailer, load the dog, cat, and kids into the SUV, and haul what remains to the next home. There, I will make sure my house is a haven, and resist the urge to buy cookbooks.
How have you saved money on moving expenses? Have your contract negotiations been affected by the new tax laws? Please comment!