1) Plan Ahead for Taxes Instead, a relocation lump sum will be taxed at the employee’s regular income tax rate. For example, if you’re moving and your regular tax rate is 25%, a lump sum benefit of $10,000 could come with a tax liability of $2,500.
How much do companies pay for moving expenses?
Relocating an employee can be a costly endeavor for companies. The average relocation package costs between $21,327 and $24,913 for renters and between $61,622 and $79,429 for homeowners, according to a 2016 report by Worldwide ERC, a relocation services trade group.
What is taxable relocation?
When you give a relocating employee any sort of relocation benefit—whether it’s in the form of a signing bonus, reimbursement for moving expenses, or even when you book a flight or pay for a service on behalf of your employee—that money and/or those services are considered taxable income.
Do you have to pay taxes on a lump sum move?
The employee is required to file that amount as income. This option puts moving companies and the employer in direct contact. The company is billed for any moving expenses, eliminating the need for the employee to get involved and potentially having to pay taxes on their moving expenses.
How does a lump sum relocation plan work?
During this process, the employee pays all of their relocation expenses upfront and gets reimbursed by their company once their move is complete. Though the employee has to pay for their move, they are not responsible for the tax burden, and it gives both the company and the employee flexibility during the process.
How can I help my employee understand moving expenses?
Here are some things you can do to help employees understand this moving expense benefit and how it will affect their taxes: Give employees a job relocation package that explains how and when moving expenses will be reimbursed by your company.
When do moving expenses become taxable to the employee?
Just to be absolutely clear: Effective from 2018 through 2025, all employee moving expenses paid to employees by your business are taxable to the employee.
