Job Relocation Expenses
Sometimes getting a new job will require relocating a home and family; unfortunately, moving can be both expensive and time consuming. Thankfully, many companies offer new employees the benefit of a relocation assistance program to help with the transition.
In this article, we're going to cover the topic of job relocation expenses. We'll start by reviewing some of the considerations that should be addressed when negotiating a new job that requires someone to relocate. Next, we'll talk about the types of costs employers are willing to pay, and the tax laws dealing with moving expenses. Then we'll finish up with a high-level relocation checklist.
There is no doubt that larger companies have the financial resources to provide assistance to new employees they're recruiting, or existing employees forced to relocate due to internal job transfers. Large companies hire more employees, so the economics of creating relocation programs and packages work in their favor.
If the cost to relocate a home or family is going to present a financial hardship, the expenses should be part of the negotiating process. It's easy enough to ask a potential employer if their company has a relocation policy. Even if the answer is "no," it's still possible to negotiate a deal or take this expense into consideration before accepting an offer of employment.
Moving a home can be an expensive proposition, especially if the real estate market isn't cooperating. Typical costs include:
- Selling and buying a home, including closing costs
- Moving furniture and other personal belongings
- Renting a temporary home or apartment while house-hunting for a more permanent residence
A general rule of thumb is that it can cost a typical family $25,000 to $75,000 to relocate their home.
Corporations may offer to pay a portion, or all, of an employee's transfer costs. This applies to people that are moving at their company's request, as well as new employees recruited into the organization. Typical expenses paid by large companies include:
- Home Sale Services
- Home Purchase Services
- Home Marketing Assistance
- Realtor and Closing Cost Assistance
- Lease Cancellation Fees
- Shipping and Temporary Storage of Personal Belongings and Furniture
- Shipping of Automobiles
- House Hunting Trips
- Temporary Housing / Lodging and Sustenance Expense (such as food)
- Travel and Lodging at Time of Move
- Airfare, Ground Transportation, Mileage Expenses
If the employee cannot sell their existing home in an established time frame, some companies will offer to purchase the home or provide a "guaranteed" price based on the home's appraised value. Less frequently, companies may offer additional assistance that includes:
- Relocation / Employment Services for Spouses
- Mortgage Counseling
- Higher Cost-of-Living Differentials
- Third-Party Buyout of Homes
- Low Interest / No Interest Loans
- Moving Boats and Motorcycles
- Utility Connections (Turn On Electric and Gas)
Keep in mind that maximum reimbursements may apply. In addition, benefits may be limited to certain timeframes. For example, temporary housing may be provided for only 30 to 60 days. Payments or reimbursements can occur via lump sum advances, checks, debit cards, as well as payments made directly to service providers.
It's also important to retain all documentation including receipts and vouchers, competitive bids or quotes, in addition to invoices and bill of lading from the moving company.
Tax Deductible Moving Expenses
If an employer doesn't offer a relocation package, then it may be possible for the employee to deduct the moving expenses on their federal income tax return. To qualify for this deduction, both of the following tests must be satisfied:
- Distance: the new job must be at least 50 miles further from the "old" home than the prior job location. If someone is unemployed, the new job must be at least 50 miles from their "old" home.
- Time: the taxpayer must work full time for a minimum of 39 weeks during the first 12 months after arriving at their new job. Self employed persons must work at least 78 weeks in the first 24 months.
Exceptions to the above time test include:
- Job loss due to a disability
- An employer requests the employee to transfer locations again
- Someone loses their job or is terminated (except in cases of misconduct)
Tax deductible moving expenses include:
- Transportation and storage of household goods and personal effects
- Travel and lodging from the old home to the new home (meals are excluded)
Note: IRS rules do not allow for a tax deduction for any of the above moving expenses when reimbursed by the employer for these same expenses. Taxpayers can only deduct costs that were in excess of any reimbursement received from an employer.
We're going to finish this topic with a short, but fairly comprehensive, checklist of items to run through before relocating.
- Moving Services: arrange for transportation of household goods, furniture, automobiles, boats, personal watercraft, and pets.
- Storage Facilities: before moving into a permanent home, consider placing some personal belongings into storage.
- Banks / Financial Institutions: move bank accounts, arrange for new checks, empty safe deposit boxes.
- Mail: notify the post office of the new address (change of address form), begin notifying family and friends of the new mailing address.
- Documents: assemble student records, medical documents, dental records, veterinarian records, marriage certificates, passports, birth certificates, baptismal records, Social Security cards, Wills, and stock certificates.
- Insurance Policies: notify life, automobile, and homeowner insurance agencies.
- Subscriptions: cancel subscriptions to local newspapers or notify national news and magazines of the new address.
- Clean Up: start the process of determining exactly what items need to move, what can be sold, thrown out, or given away.
- Local Organizations: resign from volunteer organizations, stop memberships to clubs, gyms and fitness centers, and return books to local libraries.
- Personal Belongings: pick up clothing from dry cleaners, return items borrowed from friends, retrieve items loaned to friends.
- Utilities: notify the electric, natural gas, water, sewer, cable television or any other utility services to disconnect and / or reconnect service.
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