Is My Relocation Package Taxable?

What Is a Relocation Package?

A relocation package is financial assistance your employer provides to help cover the cost of moving to a new location for work. Companies may offer these benefits to attract new talent or support current employees who are transferring to different locations.

The average relocation package costs employers between $19,309 and $24,216 for renters and between $72,627 and $97,116 for homeowners, according to corporate relocation group American Relocation Connections.

Relocation packages can cover a wide range of expenses:

• Packing and moving household goods
• Travel costs for you and your family
• Temporary housing while you search for a permanent home
• Storage fees for your belongings
• Employment assistance for your spouse or partner
• Costs related to selling your old home or purchasing a new one
• School enrollment fees

Relocation package options can vary widely based on your position, industry and company resources. Executive-level employees typically receive the most comprehensive packages, while those in competitive industries might negotiate relocation benefits as part of their overall compensation.

Learn more: How to Avoid Unexpected Moving Costs

Types of Relocation Packages

Not all relocation packages work the same way. Understanding how your employer structures the benefit can help you plan your move and budget for taxes. Here are the four main types of relocation packages you might encounter.

Lump Sum

With a lump-sum package, your employer gives you a set amount of money to spend on your move, however you choose. This option offers maximum flexibility, but you're responsible for managing all logistics.

Reimbursement

Under a reimbursement arrangement, your employer pays you back for qualified moving expenses up to a certain limit, or certain expenses. You pay for moving costs upfront, submit receipts and documentation, then receive reimbursement.

Direct Payment

With direct payment, your employer handles moving expenses by paying vendors directly. The company might work with approved moving companies, airlines or temporary housing providers to coordinate your relocation.

Even though you never touch the money, these payments made on your behalf are still considered taxable income.

Relocation Services

Some employers hire specialized relocation companies to manage every aspect of your move, from coordinating movers to helping your spouse with job searching.

While this comprehensive option can make your move much easier, the tax implications remain the same.

Could a Relocation Package Change Your Tax Situation?

The IRS treats relocation benefits as taxable income. This means any financial assistance you receive for moving—whether it's cash, reimbursement or services paid on your behalf—must be reported on your tax return and could affect your tax liability.

Here's what you need to know about the tax impact:

• Income taxes may be withheld from your relocation money. If you receive a cash payment or reimbursement, your employer may withhold federal, state and Federal Insurance Contributions Act (FICA) taxes just as they do with your regular paycheck. For example, if you normally have 30% withheld from your paychecks, a $6,000 relocation benefit might net you only $4,200 after withholding.
• Some employers "gross up" relocation payments to cover taxes. Because withholding can significantly reduce the amount you actually receive, some companies add extra money to cover the tax burden. Using the example above, your employer might pay an additional $3,700 to ensure you net the full $6,000 you were counting on. This grossing up costs your employer more, but it prevents you from bearing the entire tax burden.
• You may owe taxes even if you don't receive cash. If your employer pays moving companies or other vendors directly on your behalf, you could end up owing taxes on that benefit when you file your return. Since no money was withheld upfront, you need to plan ahead and potentially set aside funds to cover this additional tax liability.

Be aware: Understanding the tax implications of a relocation package before you accept a job offer or agree to a transfer is crucial. The after-tax value of a relocation package could be significantly less than the headline number, which affects the true compensation you're receiving.

Are Moving Expenses Tax Deductible?

For most taxpayers, moving expenses are not tax deductible. The OBBBA permanently eliminated this deduction for nonmilitary individuals. Even if you pay thousands of dollars out of pocket for your move, you won't be able to claim those costs on your federal tax return.

Here's what you need to know about the exceptions to the rule.

Military Exception

If you're an active-duty member of the military, you can still deduct qualified moving expenses. Your move must be due to a military order and a permanent change of station. You can deduct unreimbursed moving expenses for yourself, your spouse and your dependents using IRS Form 3903.

To qualify, your expenses must be both reasonable and necessary for the move. Deductible costs may include:

• Packing and transporting household goods and personal effects
• Travel expenses, including gas or mileage at 21 cents per mile
• Lodging costs during the move (meals are not deductible)
• Short-term storage fees
• Parking fees and tolls

You cannot deduct expenses that the government reimburses or pays for directly. However, if your out-of-pocket expenses exceed your reimbursement, you can deduct the difference.

Intelligence Community Exception

Beginning in 2026, certain members of the U.S. intelligence community became eligible to claim moving expense deductions under the OBBBA. If you work in this field, consult with a tax advisor to determine whether you qualify.

State Tax Deductions

While the federal moving expense deduction is gone for most people, a handful of states still allow deductions on state income tax returns, including Arkansas, California, Hawaii and New York. Starting in the 2026 tax year, Massachusetts also allows this deduction.

While New Jersey doesn't allow you to deduct moving expenses, the state does allow you to exclude reimbursements for certain expenses from your income.

Requirements vary by state but typically include moving a certain distance for employment reasons. Check with your state taxing authority or a tax professional for specific eligibility criteria.

Frequently Asked Questions

The Bottom Line

Relocating for a new job is a major financial undertaking. Between managing your budget, understanding tax implications and potentially buying or renting a home, having your finances in order is essential.

Good credit can help you secure the best terms on everything from rental applications to home loans. You can check your credit report and FICO^® Score^Θ for free with Experian anytime to understand where you stand as you plan your move.