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Relocation Expense vs Signing Bonus

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In my defense I haven’t sought a new “job” in almost 14 years.  I’ve written before about how off my resume was at the beginning of this one and Faye from LeapofFaye.com jumped in and saved the day.  And really, truly it was saving the day…I think to date I’ve had 8 first interviews for what I thought were ideal jobs.  I count myself blessed with every single call I get from an application or recruiter.

But now I think, rather hope, I am coming to the end of several application processes…multiple interviews done, references checked and reviewed,  interviews with CTOs done…etc. etc.  What I haven’t been prepared for were questions regarding “What do you expect?”

I mean I’m good with my salary requirements question…and throwing in the request for a full benefits package, that’s coming pretty naturally.  The thought of a paid day off, a paid vacation, well, that’s what dreams are made of!

But what other requirements do I have…and thus we come to Relocation Expenses vs Signing Bonus.  I’ve pretty much been clear with companies that if I need to relocate…well, they have to pay for it.  And then I was told this…

  1. Relocation Express – A budget is set at the beginning of the process, but I have to cover the costs upfront and then be reimbursed.
  2. Signing Bonus – Paid up front but taxed upfront, possibly at a high tax bracket?

So my question…what are your thoughts, have any words of wisdom for me on this front?

Relocation Expenses vs Signing Bonus – which would you choose? Pros and cons of each?  Any words of wisdom greatly appreciated!

Hope

Follow a single mom's journey to be DEBT FREE while managing this crazy life's conflicted choices with regards to kids, pets, homeschooling days and self-employment!
The sorrow and joys of this roller-coaster overwhelm her at times, but she is committed to this course.
Hope plans to dig out of debt using any resource possible including her small business EPOH, her blog and any other resource that comes to mind!

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13 Comments

  • Reply Jen From Boston |

    It’s been ages since I had relocation expenses paid, but I remember I was taxed on them, but when I prepared my return, not upfront like a signing bonus. My company at the time paid for the taxes by grossing up my pay, or something like that. Also, I didn’t have to pay for expenses up front – the company directly hired the movers and paid them directly.

    So, anyway, my main point is you may have to pay taxes on the moving expenses reimbursement.

  • Reply first step |

    Without specific numbers, I would guess that having a relocation budget is preferable to a signing bonus. My husband gets a bonus once a year as part of his compensation, and he usually nets about 1/2 of the bonus amount after taxes are deducted. If you’re expecting a big amount to cover moving expenses, the bonus payment you receive may not cover everything. Once you have an estimate of your moving costs, you’ll be able to compare being reimbursed vs. getting a signing bonus. It’s likely that reimbursement will be the better deal since it’s not taxable income.

  • Reply Maureen |

    I am fairly investment/tax savvy. My spouse faced a relocation (with the same company) 2 years ago (2014) and I can tell you that we got a bigger tax break for the relocation check they cut us then on any bonus income. I have a great accountant, but we were able to take our relocations costs as well as one “planning” trip in which we looked for housing, etc. Our taxes worked better than I had ever hoped, but some of this might have been offset from a move to a state that has lower income taxes (but higher real estate taxes). I relocated from Minneapolis/St. Paul to Chicago. See if you can ask a CPA the pros/cons of both.

  • Reply Marzey doats |

    I am going to disagree with the previous posters and suggest a signing bonus might be the best for you. First, qualified moving expenses to move to a new job location over 50 miles away are deductible, and I assume that being self-employed you deduct rather than just taking the standard exemption. Second, Your signing bonus might have a lot of taxes *withheld* up front but the ultimate amount of tax you pay on it will be determined by your tax bracket. I imagine with all your deductions, and dependents that your actual tax bracket is relatively low. Plus tax season is looming, so you would get your refund relatively quickly as long as the signing bonus comes in december.
    And, because of all the downsizing you have been doing, I think your moving expenses will actually be quite low. Therefore you are likely to get more money above the cost of moving if the company just gives you a signing bonus. They are likely to assume that moving would be roughly say 5,000 dollars, because that is what it would be for most people. But for you it would be less, and you would then get to keep any money you saved on moving. Finally, I think that given how low your cash reserves are getting, it would be nice to have the money in hand rather than depending on later reimbursement.

    Congratulations on getting to this point! Keeping my fingers crossed that your next post will be about your new job!

  • Reply Cj |

    So I just relocated across the country and I took the relocation package for a number of reasons.

    1) The company arranged the movers and took care of that up front. I was told I would have to pay for my relocation up front and they would reimburse me, however that was only for my driving (mileage), food, hotel and apartment deposit. So see if the actual movers are included in the up front cost or if they arrange that for you. If they do a lot of relocations then they may do it for you because it saves them money too.

    2) If the company has preferred movers, that means you normally do not have to call a bunch and get estimates.

    3) It is one less thing to worry about in terms of packing up your items and driving them while you are looking for places to live, getting medical/dental/vision records/vet records and looking for new ones in the new area.

    2)If you take the signing bonus, make sure it is enough to cover your expenses – moving truck or movers, breaking your lease, food, hotel, gas during the move, apartment deposit, don’t forget boxes, tape and packing materials, turning on utilities (I’ve never had to do a deposit but I know some people have) new plates for your car, new driver licenses (I forgot about this when I moved….and I needed a new license to get a library card for example). Moving is less expensive this time of year.

    3)Also my company offered to fly me to my new city to look for a place to live in. I already knew the area so I did not need to but if you are looking someplace where you do not know the area, request that as well.

    4) Also with many relocation packages, companies will put you up somewhere for a month while you look for a place or are waiting for one to open up.

    Also don’t be shy about NEGOTIATING your relocation package. They may meet your needs or they may say no to some things but relocation packages generally always have wiggle room.

    Also vacation always has wiggle room too!

    Good luck!

  • Reply Becky Noël |

    Hello!! Senior Recruiter/Relocation Specialist here – LOVE that you asked this question. 🙂

    I would agree with what Marzey said based on your personal situation, but would also say that it will completely depend on the amounts that are offered for each scenario. To find out the withholding amount for your state, you can google “how are bonuses taxed in XXX”. One thing to note, though, is which state the bonus will be recorded in – your current state or new state. Typically it’s in the state where you will be living, but it’s important to ask this! Periodically, companies will offer the benefit to “Gross up for taxes” which means that if they are wanting to give you $5k, they will pay you a higher amount that, after taxes, equals $5k. If a company is willing to do this, I’d say it’s hands-down the best option for you.

    With relocation reimbursement, in my experience CJ’s experience is out of the norm. Companies typically offer a flat, reimbursable amount and may offer suggested providers but rarely pay for any portion of the move if it’s set up as a reimbursement. Marzey is again correct 🙂 in that there are significant tax write-offs for moving expenses for a job more than 50 miles **farther from your home than your previous job was**. (Check IRS tax topic tc455 for more info.) These write-offs can add up quickly, especially if you need to purchase new clothes for a new position as well. Since you can not write off anything your company reimburses to you, it would be up to you to determine what amount you’d be comfortable fronting to receive reimbursement.

    As CJ mentioned, PLEASE negotiate your relocation package. Sites like moving.com or citytocitymoving.us will give rough estimates on the costs, so be informed on what the actual numbers are likely to be for your move in order to negotiate. ALWAYS negotiate your signing bonus, but be cautious to not take a pay cut to accommodate a larger bonus as bonuses typically don’t extend past year 1 or 2. (I doubt you’d do this, but I’m continually surprised how often this happens.) And don’t you dare take the first number they offer you. 🙂 Check out sites like Glassdoor.com for comparable pay for the role within that company and market. Figure out what number you would realistically want and add $10k. Men are 4x more likely to negotiate their salary and anyone who does is likely to get more than the original offer. Most recruiters are told “Offer X, but you can go to Y if needed”. If you’re offered $90k, explain that you appreciate the offer but, based on your research and belief in the value you bring to the role, you’ve been hoping for closer to $105k. (or whatever the numbers really are). Don’t be afraid that you’ll lose the offer – they obviously wanted you enough to make the offer and companies will be very candid when they absolutely can’t do more than X.

    I’m happy to help if you need more info! You can reach me by name at gmail. 🙂

    Becky Noël

  • Reply Angie |

    Taxes shouldn’t come into play too much on this. For relocation expense reimbursement, it can be provided as a lump sum (not dependent on how much you spend) or reimbursed based on your actual costs. I’ve done a move both ways. Neither method will affect your taxes since the company is paying outside of your salary. The YE W2 will accurately reflect the amount as non-taxable benefit. It was a little annoying to get reimbursed, but didn’t matter since I had 45 day leeway by putting almost everything on credit card. If you don’t have a credit card with a high limit than being reimbursed would be difficult to pull off since you have no emergency fund. Depending on the company they may pay for cancellation charges for breaking your lease. This is far less likely if you are getting reimbursed for expenses. A lump sum amount would be very similar to a signing bonus in terms of having a set amount of cash.

    A signing bonus in lieu of relocation expenses. This is best if you are willing to move as cheap as possible allowing you to keep the rest of the money! I would expect this is best for you since you are so creative and have little possessions. In terms of taxes, if you are relocating over 50miles for job purposes you are able to deduct moving expenses that you have receipts for. This would allow you to use excess money towards any additional apt deposits or damages also. One drawback, you may need to negotiate the timing of the signing bonus to be provided prior to the start of work.

  • Reply JayP |

    Are these large companies? If so they may work with a relocation company. IF you have that option I recommend it. They take care of a lot of the details and a lot of the expenses go straight through without any tax implications. If you go for the signing bonus, don’t underestimate all the costs involved with moving, including deposits, fees, house hunting trips, etc.

    Also make really sure you like the company and the area. Moving to a new place has been hard on our family even 3 years later in some ways. Most companies have a payback clause – between 1-3 years where you’ll have to pay back the relocation if you voluntarily leave. Sometimes signing bonuses don’t have the payback feature.

  • Reply Emily Carter |

    Nice post! For one thing, moving isn’t cheap. Many employers will pay at least part of the relocation costs, but employees should get as many details as possible about their relocation package before committing. Thank you for sharing.

  • Reply Jen |

    It seems fewer companies offer relocation packages,which are usually better than a signing bonus. However, many companies will offer a signing bonus to help offset moving expenses. I see some job postings that indicate no relocation assistance is available. In this economy, you have to be thankful for whatever you can get. If you do get options, I recommend talking to your accountant to weigh the pros and cons. If you rent, a signing bonus would possibly be the better choice since it is paid upfront, and you can deduct the expenses.

So, what do you think ?