minhan

Got an offer letter and we have 10k allowance for relocation.

Is it taxable? If we have to receive it in the US, can we claim other expenses like to buy new electronic stuffs, bed, etc... because of the move? Otherwise, I feel it's like we have to pay tax on the allowance meant to support us because of unexpected expenses / costs.

Hawkini

I'm sure someone will come along and say this (or correct me) - many threads say the same thing - you will pay tax on ANY income (it only differs on the rate) - however what you should ask is if the employer will gross the 10k up, i.e. so that you NET 10k, you still pay tax but you actually get 10k.

Some moving costs are tax deductible - see IRS publications to see which - but when my company gave me the allowance they withheld tax on the income, and when filing my return I had a healthy refund of most of the tax back.

Owen778

A couple of things to say to your reply:

- As Hawkini says, it may be that your employer will "pay the tax" on your relocation lump sum. This information should be in the relocation agreement they provided.
- I wouldn't stress too much about it now. Your relocation expenses should appear on your (or your spouse's) W-2 form at the end of the year. Either the W-2 from your employer or a separate one from the relocation agent.

minhan

Thanks for a quick response. I'm still not sure how to deal with this. We receive this through the relocation company as part of the moving package. We're still in our home country and they said they can wire the money to our account in our home country. They don't need receipts, we don't need to make any claims and we can spend that whatever way we want.

I thought it's better to receive it in my home country where i pay 16% tax on income than the tax rate in the US.

Anyone else have same situation like me?

MsElui

we have had company relo's twice. The big tell will be if it appears on your payslip as a sum. then clearly you are paying tax on it at that time and hope that the company is either grossing it up so you end up with the 10k, or doing some tax return adjustments . The fist relo we did we had to submit a return and then the company accountant looked at the return and calculated a sum of money we needed to put us back to equilibrium. so we got an even bigger refund than first expected.

this relo - it was grossed up so we got the exact cash we expected but the sum they sent was higher so once the tax was taken we were left with the right amount.

If they are not asking for receipts then its likely going to show in a salary slip (a sep one to normal in our case).

md95065

The amount is almost certainly taxable and, once you are in the US, it won't matter where you get the money.

The one thing that might help (although this will depend on a number of factors) would be if you were to receive it outside of the US before you ever set foot in the US.

Note, also, that the expenses that you describe - buying "new stuff" - are not allowable as "moving expenses" as far as US tax deductions are concerned.

Brit_Girl

We are having a relocation package and it is taxable so I am told.

ubernathan

My understanding is that if payments are made to a relocation company to assist you, those payments are not your income -- so not taxable (they may be the subject of sales tax or whatever though). If payments go to you, they are income and taxable at source -- then you claim the deductible expenses and get a refund. Of course there could be a split with some to the relocation co and some direct to you.

durham_lad

When we relocated to the USA I got cash advances from the company to pay for relocation expenses such as air fares, movers, hotel etc, and completed expense reports so none of that money was taxed. I also got $8k cash to buy small appliances etc, and that sum was grossed up for taxes and appeared on my W2 at year end. The company provided a tax preparer to ensure all the taxes were paid correctly.

minhan

Thanks all for your comments.

I just clarified with the relocation company. We receive the full 10k but then it will appear in our tax form by year end. We will be responsible for tax.

It's clear to me now.

I will need to find out what expenses I can claim for tax deductible for the relocation?

HartleyHare

This is the IRS publication for Moving Expenses and a good place to start: http://www.irs.gov/publications/p521/index.html