Certified Relocation Professional (CRP) Practice Exam

When can temporary living expenses typically not be deducted for tax purposes in relocation scenarios?

1. When the employee is a new hire

2. When it exceeds standard allowances

3. When the relocation is facilitated by the employer

4. When moving is not full service

The correct answer is: When the employee is a new hire

Temporary living expenses typically cannot be deducted for tax purposes when the employee is a new hire because, under the IRS guidelines, deductions for moving expenses and related temporary living costs have specific qualifications closely tied to the nature of the employee's work situation. New hires may not meet the criteria for deducting moving expenses if the move is for a new position and does not involve a transfer from another location within the same company, or if their employment has not established a sufficient connection to the new location. In contrast, situations involving employees who are being transferred within their company, like options C and D, often come with a more direct association with deductible moving expenses, provided they adhere to the necessary criteria set forth by the IRS. Additionally, temporary living expenses typically have maximum limits established by the employer, making option B less relevant for tax deductions since exceeding those allowances doesn't directly negate the possibility of a tax deduction; rather, it relates to company policy.