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I interned last summer at a big tech company in the US and I just got my W-2 form. The company paid for my housing and added ~24k for renting an apartment for 3 months to my gross pay.

First, I wanted to complain about it but when I calculated the tax return with the housing allowance and without, it came out higher with the housing allowance.

Is this reasonable? It doesn't make sense to me. The withheld taxes are a lot higher due to the 24k, but the company paid this, so it wouldn't make sense to get more money back?

  • $24k for 3 months of an apartment? Wow! – Ben Miller Feb 2 '17 at 13:21
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The are a couple of explanations that I can think of; though for determining exactly what is different you will want to print out both returns and compare them line by line to see how they differ.

  1. If the company grossed up your income to account for the taxes on housing (possibly by paying the additional withholding), you may be just benefiting from them estimating your tax rate. This can especially be the case if your only work was the three month internship. They would have to assume your salary was for the entire year.

  2. There is an earned income tax credit for low wage earners that you may have qualified for (it would depend your specific circumstances if you meet the criteria). But that credit for a range of income actually pays out more the more you earn (to encourage working that extra hour instead of reducing benefit because you had another hour of employment).

As for the housing subsidy itself, while the value is quite high the IRS considers that to be a taxable benefit that the employer provided you and so it needs to be added to your W-2 wages. $8k a month seems quite high, but I don't know the quality of the apartment you were provided and what the going rates are in the area. Given that you said you worked for a major tech company, I can imagine that you might have been working in an area with high rents. If the employer did gross up your paycheck so as to cover your taxes, that $24k would also include that extra tax payment (e.g. if the employer paid $8k in additional taxes for you, then the housing cost that they directly paid were $16k).

  • So I would get back the taxes that the company paid extra for the housing allowance? – lukas1994 Feb 2 '17 at 14:17
  • @lukas1994 if the company over paid taxes on your behalf for the housing, then yes you would get that back when you file your tax return as part of your tax refund – Eric Johnson Feb 2 '17 at 14:19

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