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Relocation bonus and taxes
I am being relocated by my company (roughly 100 miles or so-from Las Vegas, NV to Kingman, AZ). The company is paying for my moving expenses (rental truck, gas, moving supplies, etc) and since I am being promoted to a certain level, I am also getting a relocation bonus to "cover incidentals" (ie breaking my current lease). I was told by the coordinator that the amount will be grossed up to cover the taxes, but I was warned by another individual that it will cause me to owe taxes next year to about half of the bonus. I need to use part of it for sure to cover breaking the lease, but should I bank the rest of it to pay taxes? Does this just fall under normal earned wages because it is grossed up or is it listed as something else? I'm single, I claim one exemption, and I will remain in the 25% tax bracket. I can give specific details if its helpful, but I just want to know who I should believe.
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It is possible that the extra money will cause you to break into another tax bracket (25% to 28%), but the withholding by the company SHOULD compensate for that.
If you are receiving a lump sum bonus, the company should withhold 30% of it for income taxes. If there is no withholding on the bonus, then bank one-third of the bonus for taxes. Also recognize that, unlike Nevada, Arizona DOES have a state income tax, and if you get the bonus after you arrive in Arizona, Arizona state income taxes will be assessed on the bonus. |
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