Certified Relocation Professional (CRP) Practice Exam

What is the maximum moving deduction the transferee can take on their federal tax return based on the given relocation assistance?

1. $4,500

2. $5,500

3. $13,500

4. $16,000

The correct answer is: $5,500

To determine the maximum moving deduction a transferee can take on their federal tax return based on the relocation assistance, it's important to consider the relevant tax laws that pertain to moving expenses. The deduction for moving expenses is governed by IRS guidelines, which provide specific thresholds and limitations on how much can be claimed depending on the circumstances of the move. In this context, $5,500 stands out as a common cap for moving deductions related to relocation assistance, reflecting a balance that accounts for various expenses that a transferee may incur during the moving process. This figure aligns well with the annual limits that were established in previous tax rules, recognizing the typical costs associated with moving for new employment. When assessing the other amounts, they may exceed the reasonable expectations of typical moving expenses as per IRS guidelines, thus making them less likely to be applicable for deduction claims. Moving deductions generally should be reasonable and justifiable based on the actual expenses incurred or the assistance provided during a relocation. Hence, $5,500 is the correct understanding of the realistic maximum deduction for a transferee when factoring in standard IRS provisions and general relocation assistance practices.