1

Good day everyone,

I accepted a position with a company and the company has provided a fixed amount of funds for a relocation that is going to be paid as a lump sum amount. The relocation agent told me this amount will be taxed as supplemental income.

In lieu of this, I will very obviously not be receiving the full amount for relocation so are there any expenses that I will incur during moving that are tax deductible so I can try to recoup some of the money that will be withheld for taxes?

EDIT: Currently live in the United States (Pennsylvania). Moving to Colorado.

  • 3
    If only my crystal ball was working today... Alas, cannot miraculously guess the country! – littleadv Jan 2 '15 at 18:41
  • United States. Currently live in Pennsylvania, moving to Colorado. – rodey Jan 2 '15 at 19:14
6

Go through the IRS Publication 521.

Generally, relocation assistance is given either as :

  1. Reimbursement for the expenses paid (or the company pays the expenses to begin with), in which case the reimbursement is not taxable, but you cannot deduct the expenses.

or

  1. Lump sum payment regardless of your actual expenses. In this case the relocation assistance is essentially a nice name for a sign-on bonus, is taxed as a bonus, and is essentially a part of your compensation. Your moving expenses can be deducted as explained in publication 521.
  • What if in scenario (1) the company reimburses expenses that the IRS would not normally consider tax-deductible? Do you have to report that fraction of the reimbursement as ordinary income (even though your company might not include it on your W-2)? – dg99 Jan 2 '15 at 21:13
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    @dg99 company reimbursement has to follow IRS rules to be non-taxable. If it does - then it is. Whether it would be deductible to you or not is irrelevant. – littleadv Jan 3 '15 at 0:01

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