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    kyalega's Avatar
    kyalega Posts: 5, Reputation: 1
    New Member
    		  
    #1

    Jun 22, 2005, 02:10 PM
    Relocation Bonus Question again..
    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
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
    		  
    #2

    Jun 23, 2005, 06:04 AM
    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.
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