Relocation benefits are costs associated with moving to a new job that are incurred by a new employee and paid by an employer. Relocation benefits are usually are paid to employees who are required to move to another location for work related purposes. Since relocating will incur significant expenses for an employee and their family, employees will want their employer to pay at lease some of the cost of relocation.
The following expenses may be included by employer as relocation benefits:
- Moving expenses ;
- Temporary housing;
- Transportation costs including shipping of property
- Storage Fees
- Real estate agent fees; and
- Additional Loans taken out to buy a house in new location
- Assistance in selecting a paying for child care
Am I Entitled to Relocation Benefits?
Companies are not required to pay an employee's relocation expenses and even if these benefits are offered, there is often a great discrepancy in how much is given. If an employer asks that you make an unexpected or drastic move, it may be more flexible with its benefits.
Many employers that do not provide relocation benefits packages for living expenses may offer a higher salary to compensate for increased living expenses or a better comprehensive benefits package that includes more vacation time, better health coverage, stock options, or other bonuses.
Are Employers Required to Pay for Relocation Benefits?
No. Employers are not required to pay for relocation expenses if the employer is relocated to another geographical location in order to fulfill a job related to the employment. Usually employers notify the employer before the hire that the work may require travel or a possibility of relocation.
Are Relocation Expenses Made by Employee Tax Deductible?
If an employer has not reimbursed you for any relocation expenses and employee made paid for the relocation expenses, these expenses related to your work are fully deductible and can be included on you W-2 form when you file your taxes:
- Expenses made to move to another location (moving van, rental car, gas, packaging supplies, tolls, movers insurance, etc)
- Costs made to ship a car, boat, pet, motorcycle, furniture
- Storage fees of household goods not taken to new location
- Tips and money paid to any movers who helped with the move
- Cost of disconnecting and connecting any household supplies
- Standard mileage for use of a car to travel to new location ( 19.5 per mile)
To qualify for these moving expenses deductions on your federal income tax return, the following must be satisfied:
- Distance: The new job must be at least 50 miles further than old home in the prior job location.
- Time: The taxpayer employee must work full time for a minimum of 39 weeks during the first 12 months after arriving at new job location.
- Expenses: The expenses must be paid by the employee. The moving expenses that were paid directly by your employer and not by you is not deductible and cannot be included on your W-2 or Form 3903. These expenses may be deductible for employer who made the payments only.
Are Relocation Benefits Negotiable?
While successful negotiations are possible and may be affected by your position in the company and family or medical issues, company policies or resources may also place limits on your negotiating power. Many employers are willing to negotiate relocation benefit packages that address their needs. Every relocation package is negotiable and an employer is likely to agree on a relocation package that provides an advantage to them as well even if it costs more for employer.
Are Relocation Benefits Packages Taxable?
When you employer provides employees with a relocation benefits package for any type of moving and relocation expense, they usually provide a lump sum package to the employee. Lump sum payments to employees for relocation expenses, including moving, are fully taxable since they are considered compensation earned that is related to employment. However, if the employer directly makes payments for moving expenses and covers all the relocation expenses through a direct billing arrangement, then the employee is not taxed since they receive no type of gross payment.
How Can I Prepare a Relocation Benefits Package That Suits Me?
The whole purpose of relocation benefits is to negotiate and receive benefits that address your needs. Prepare to negotiate a package with your employer that entitles you to good relocation benefits. Here are some ways you can determine what kind of relocation benefits package suits you:
- Find Out What Assistance is Typical: Ask other people in the company that have been relocated to determine what types of relocation benefits and assistance they received.
- Develop Ideas That Benefits You And Employer: Many companies are willing to provide relocation benefit packages that also fulfill their needs. Your employer may be willing to negotiate a deal that provides an advantage for both sides.
- Focus On Your Interest: Determine what financial assistance you would need to relocate you and your family. Consider not only expenses for moving, but also expenses that might occur in the future since you are in a different location you are not used to.
- Get The Agreement In Writing: Once you and your employer have come to an agreement regarding the relocation benefits package, make sure that the agreement is in writing and provides all the details and negotiations discussed by both sides.
Discussing the problem with your employer and reviewing your employment contract could help remedy the confusion. Additionally, if you are unable to resolve the issue, an employment attorney may also be able to help settle your dispute.
Do I Need an Employment Lawyer?
Since individual employment situations vary significantly, an employment lawyer who is familiar with workplace standards and contracts could answer questions and discuss possible solutions.