[Mar1014]

My husband has been offered a job that will require us to move from our Atlanta home to a nearby state. They are offering to give him a relocation bonus - as opposed to reimbursing him for moving expenses after the fact - to handle the move.

My question is this - say the relocation bonus is $25K, what are the tax ramifications? In my mind, because the $25K is an amount we plan to use specifically to complete the move and for no other purpose, it should not be 'counted' as part of our overall earnings for the year when it comes time to report our taxes.

In other words, if the company had decided to pay for the move themselves it wouldn't be counted as income for us and there would be no tax penalty, but because they're giving us the money and asking us to handle the move ourselves, are we going to have to shoulder a tax obligation?

My concern is that being temporarily pushed into a different tax bracket will raise our overall taxes for the whole year, even though that money was not meant as a bonus but more of a one-time use.

Thanks so much for your help in understanding this.

[RubyPitbull]

Mar, the 25K will be applied toward the income portion of your tax return, but if your husband is relocating for his job, you can deduct all expenses associated with that move from your tax return next year. You will only be responsible tax wise, for that portion above and beyond the expenses. So, hold onto ALL receipts. You can deduct tips to the movers, meals and hotels during your move. A good tax accountant will know exactly what to do. If you have an accountant already, you may want to call him/her to discuss this ahead of time so they can give you full guidance on this. I would suggest waiting until after Monday to call. They are a bit busy at the moment.;)

[ebaines]

One thing to keep in mind is that the IRS is a bit stingy in terms of what they allow you to deduct for moves. For example, I believe the IRS limits the number of back-and-forth trips you can deduct, but in my experience it usually takes several trips back and forth for house hunting and managing the sale and ultimate move out of the old house. In my career I've moved twice for work, and in both cases I was fortunate enough to have my employer "gross up" their reimbursements to me to cover expected income taxes. So make sure that the $25K is adequate to cover all your house hunting and move expenses plus the taxes on the non-deductible ones.

[AtlantaTaxExpert]

Ebaines and RubyPitBull's experiences on moving expenses are not quite up to date.

You can deduct the cost of the actual move of your household, but NOT the house hunting trips. If it takes TWO trips to move your HHG, then you can deduct the mileage for two trips, but the house hunting trips, plus trips back to Atlant to sell the old house, etc. are NOT DEDUCTIBLE.

You can deduct the lodging costs of the move (lodging enroute plus the FIRST night at the new location), but NOT the meals.

You can deduct the cost of the rental van to more your HHG, or the cost of a professional mover, but NOT the costs of selling your house, breaking an apartment lease, new utility deposits, etc.