Hi Atlanta Tax Expert.

Thanks a lot for your advice. However, I talked to my company today and they told me that IRS considers relocation allowance as a Bonus and it will be taxed at a higher rate which is 45%. Now, as I told you, I am on f1 status working on CPT in the state of California. Will it be applicable to me? Is there a lower rate which I can ask for?

Thanks a tom for help

Kyalega:

Your company is either incorrect or there is confusion as to terms.

The bonus is not taxed at the higher "BONUS" rate, it is withheld at the higher rate. I believe 45% is a bit excessive, as most lump-sum payments like bonuses are withheld at 30%.

Regardless, it will be taxed at your marginal tax rate, which is probably 15% for the federal level.

It is possible the additional 15% is for California, which does have an exceptionally high tax rate.