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I have recently accepted a new job which requires me to move across the country and as part of my employment I was offered a signing bonus to assist with relocation. It just barely occurred to me that bonuses are subject to taxation in the amount of ~40%, with a portion returned on the next tax return. Given this fact, I am going to lose a substantial amount of the relocation assistance I was offered to Uncle Sam.

What I am wondering is, would I be able to avoid taxes on the relocation assistance being offered if it is treated as an itemized expense reimbursement, rather than a bonus? Also, assuming the expense reimbursement would not exceed the bonus offered, would taking this approach affect the company any differently?

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3 Answers

up vote 1 down vote

You're talking about two different things. If you were offered a "signing bonus" then it is income and taxable, even if the purpose was to help with relocation. If your new employer offered to pay all or part of your relocation expenses, that is not taxable, provided that those were expenses you actually incurred.

You should confer with your company as to which it is, and if you actually spent money to relocate you should persuade them to make it the second.

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I did this about 6 years ago. From what I remember, no taxes were taken out. This is due to the assumption that most, but not all, of the expenses are deductible so no tax is owed. Make sure to keep good records of what you spent. I think that is was meals and lodging during the move that was not deductible. Also, if you spend more than your company pays for, the rest is still deductible.

It would probably be a good idea to look through IRS publication 521 to see what they have to say about what is and isn't deductible.

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If the company is reimbursing you directly for your moving expenses and they retain the receipts, then they can write you a regular check. If not, it's income and must be taxed. – Michael Pryor Mar 9 '11 at 22:17
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I'm not an accountant or a lawyer, however your relocation expenses should be 100% expensable to the company. BUT guess what? They are also 100% deductible to you.

So I'd say, take the bonus and then just claim the deduction on your personal income.

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