Relocating to a new city or state for your job is a major expense. Some companies offer employer-paid moves to shoulder the financial burden of your relocation and reimburse you for moving expenses, travel, and related costs. In this article, we’ll cover everything you need to know about employer-paid moves, from IRS regulations to components of a relocation benefits package.

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What Is a Relocation Package?

Some employers offer relocation assistance to help employees easily move from one spot to another. Assistance varies by company, but most employers provide employee relocation packages if you have to move more than 50 miles to your new location. A comprehensive employee relocation package can help companies retain top talent and mitigate some of the stress of moving by covering relocation costs.

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What Does a Standard Relocation Package Include?

Although you can negotiate the terms of your employer-paid move, most standard relocation plans cover similar expenses. Employee relocation packages often include the following services:

• Moving services and insurance: Your employer should cover the full cost of transporting your belongings to your new home. They may also cover related moving services, such as cleaning and moving insurance.
• Packing services: To alleviate the stress of moving, some companies provide the convenience of full-service movers who will expertly pack your home and expedite the move.
• Professional real-estate assistance: A company might offer comprehensive support in selling your home, breaking your lease, or finding suitable housing in your new location, ensuring peace of mind during this transition.
• Short-term housing: If you need time to find permanent housing, your company may provide temporary accommodations at a local hotel.
• Storage solutions: Companies may cover the cost of short-term storage if there’s a gap between the employee’s start date and move-in date.
• Tax assistance: Companies should help you navigate the tax implications of your move and any potential deductions or credits you can claim.
• Transportation costs: Your employer will likely reimburse you for your travel expenses, whether you drive or fly.
• Visiting the area: Companies typically pay their employees to visit a new location at least once before moving to house-hunt and explore. 

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Employee Relocation Covered Expenses

A corporate relocation package generally covers qualified moving expenses, temporary housing, and lease break fees for employees who rent. Relocating a homeowner typically costs more due to the added complexity of selling a home and purchasing a new one, which involves real estate commissions, closing costs, and property taxes.

The bulk of the cost to relocate an employee is hiring movers, which ranges from $8,394 to $13,873. Figures fluctuate significantly based on factors such as the time of year, distance, home size, and location.

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How Do Employers Pay for Moving Expenses?

Employers typically use one of three methods to cover relocation expenses:

Direct billing

Vendors and service providers send invoices directly to your employer for payment as part of the direct billing process. This method minimizes the financial burden on employees, who are not required to front any expenses. Direct billing is most common among larger organizations with established partnerships.

Lump Sum Payment

Your employer pays you a one-time upfront lump sum to cover your relocation costs. This method offers the employee autonomy but is less flexible regarding the amount an employer pays. You will be responsible for managing your budget and may need to cover any costs that exceed the lump sum.

Reimbursement

Your employer pays you a one-time upfront lump sum to cover your relocation costs. This method offers the employee autonomy but is less flexible regarding the amount an employer pays. You will be responsible for managing your budget and may need to cover any costs that exceed the lump sum.

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Is an Employer-Paid Move Taxable?

Employer-paid moves are now taxable. The Tax Cuts and Jobs Act of 2017 suspended moving expense deductions and the exclusion of employer relocation packages. This tax reform carries a special exception for military members. 

The company adds the value of any relocation benefits to your regular salary, so if you receive a $60,000 salary and $10,000 worth of relocation assistance from your employer, your total taxable income is $70,000. That extra $10,000 is subject to the same federal income tax rates, state income tax rates, and FICA taxes you usually pay.

Treating relocation assistance as taxable income can cause problems for employees. If your employer deducts taxes on your relocation benefit from your paycheck, you may get a significantly lower payment than expected. If your employer does not withhold taxes or chooses a direct billing model, you can have a hefty tax liability when you file your tax return.

Tax Gross-Ups

Your employer can mitigate the tax law effect by grossing up your relocation benefit. A tax gross-up involves increasing the amount of your relocation payment enough to cancel out the taxes you’ll incur.

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Negotiating Your Relocation Package

Review your company’s offer carefully before negotiating or agreeing to a relocation package. Compare the details of the company’s relocation policy, including the amount and types of services covered, to your needs and estimated moving expenses.

Negotiate the relocation package for a higher amount, additional services, or increased flexibility only after you receive a formal job offer but before you sign the employment contract. This window leaves room for constructive dialogue that doesn’t jeopardize the employment agreement. Be prepared to articulate how a more comprehensive or tailored relocation package would benefit you and your new employer.

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International Relocation

International relocation is more complex than a domestic move and involves securing visas and residency permit requirements. Expenses such as visa application fees and legal consultations contribute significantly to an international move’s overall cost. 

You will require a significantly larger budget to ship your household goods overseas or purchase new things upon arrival. You must set up an international bank account, navigate different tax systems, and learn local customs and regulations. The housing search may be more difficult, and travel will be more expensive and challenging, particularly if you are moving with a family or pets.

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Moving for Military Reassignment

Military reassignments often require swift and seamless transitions for service members and their families. The U.S. government has consequently established contracts with moving companies for military moves. 

Learn more about permanent change-of-station (PCS) benefits and how to access them on the Military OneSource website. You can also get help at your local Relocation Assistance Program office.

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Our Conclusion

Navigating an employer-paid move requires a comprehensive understanding of the benefits your employer offers and the associated tax liability. Carefully review your employer’s offer, compare it to your needs, and negotiate if necessary. Remember that special benefits are available for military members.

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FAQ About Employer Paid Moves

Why might a company pay an employee to move for a new job?

A company might pay for an employee to move for a new job to attract or retain top talent, facilitate a seamless transition, and ensure the employee’s commitment to the relocation.

What is considered a reasonable relocation expense?

A reasonable relocation expense depends on various factors, such as the distance the move requires, the employee’s current location, and industry standards. Reasonable expenses include transportation, temporary housing, and moving services.

How do I know if the company is paying for the move?

Review the terms of your job offer or employment contract to find out if the company is paying for your move. The company’s human resources department or onboarding staff can answer any questions.

Can I write off moving expenses for work?

You cannot write off moving expenses for work unless you are a member of the Armed Forces on active duty and moved due to a permanent change of station, as per the Tax Cuts and Jobs Act of 2017.

Can an LLC write off moving expenses?

An LLC may be able to deduct moving expenses if the move is a legitimate business expense directly related to the business’s operation. Tax laws are complex and subject to change, so it’s best to consult a tax professional.

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