What Should You Consider When Accepting A Relocation Package?

If you've recently received a promotion (or new position) that requires you to move to a new city or state, you may be wondering whether your employer will offer to cover some of these costs. Indeed, when filling specialized jobs, many employers find it worthwhile to pay to relocate the right employee rather than try to mold a local employee into a position that may be a bad fit. What types of expenses may your employer cover in connection with a relocation package? Will you be taxed on these costs as income? Read on to learn more about the factors you may wish to keep in mind when negotiating a relocation package.

What types of expenses may be covered by your company?

Relocation packages can be fairly basic or all-inclusive, and often the terms of these packages can be negotiable. You'll want to determine what qualities of the moving process are most important to you, and negotiate accordingly. For example, do you value convenience over all else? You may want to request a full-service move that doesn't require you to lift a finger during the packing or shipping process. In other situations, assistance with the sale of your current home or purchase of your new home may be of paramount importance. Some of the benefits you may be able to request include the following:

  • Moving services

Even the most basic relocation services involve assistance in packing and shipping your household belongings. In some cases, your relocation package will simply provide a flat dollar amount to cover the cost of moving your belongings and allow you to make these arrangements yourself, while in others your employer will directly pay the moving company for a specified set of services. In the latter situation, you'll often just need to provide a date and time to the moving company, and are then free to travel to your new home at your own pace while your belongings are shipped for you.

  • Auto shipping

If you're moving cross-country, you may prefer not to put the extra miles on your vehicles -- or possibly even concerned that an aging car or truck won't make the trip. In this situation, your employer may pay to ship your vehicles. (Other large items, like boats or campers, may have to be shipped on your own dime.)

  • Temporary lodging

If you haven't yet found a home in your new city or state, your company may pay for extended-stay services for you and your family at a hotel or apartment near your work site. Any storage unit expenses associated with your temporary stay will likely also be covered if your package offers this option.

  • Lifestyle assistance

Your company may offer to pay additional expenses associated with your specific situation. For example, if you have young children who will also be moving, or if you're the primary caregiver for an ailing parent, your company may help pay for temporary daycare or assisted living services until you can settle in your new location and find more permanent options.

Will your company-paid relocation expenses be taxed?

Under certain circumstances, your relocation package may be tax-free -- essentially allowing your employer to provide you with extra tax-free compensation. As long as your relocation assistance was entirely related to the cost of moving your belongings (and yourself) to your new location and was fully accounted to your employer, you won't pay taxes on these costs. However, if your employer simply provided you with a flat reimbursement and didn't require you to turn in receipts or refund any excess assistance, you'll be taxed on the full amount as income. It's often best to document your expenses and refund the overage (even if it can be tempting to pocket the cash), only to avoid the hit at tax time.