Moving pay & taxes
How relocation bonus tax works in 2026
Before 2018, employees could exclude employer-paid moving expenses from taxable income and deduct unreimbursed moving costs. The Tax Cuts and Jobs Act (TCJA) eliminated both benefits for everyone except active-duty military. In 2026, every dollar of a relocation bonus, moving reimbursement, or direct-paid moving service appears as taxable wages on your W-2.
Tax withholding breakdown
Relocation pay is classified as supplemental wages. The federal withholding rate is 22% flat (37% on amounts exceeding $1 million). FICA applies at the standard employee rates: 6.2% Social Security up to the $184,500 wage base (SSA 2026) and 1.45% Medicare with no cap. State income tax is deducted on top, ranging from 0% in states like Texas and Florida to 13.3% in California.
| Relo package | No gross-up net (5% state) | Gross-up needed | Gross-up total cost |
|---|---|---|---|
| $10,000 | $6,535 | $3,465 | $15,305 |
| $20,000 | $13,070 | $6,930 | $30,611 |
| $30,000 | $19,605 | $10,395 | $45,916 |
Gross-up = employer pays extra so employee nets the intended amount. Employer cost is significantly higher.
Gross-up explained
A gross-up is when the employer increases the relocation payment to cover the tax liability. If you need $10,000 net to cover moving costs and the combined tax rate is approximately 34.65%, the employer pays $10,000 / (1 - 0.3465) = approximately $15,305. The extra $5,305 covers all taxes on the grossed-up amount. Not all employers offer gross-ups — ask during offer negotiation.
Lump sum vs. reimbursement
Tax treatment is the same: both lump-sum relocation bonuses and direct reimbursements of moving costs are taxable. The practical difference is timing — a lump sum gives you flexibility to spend as needed (and keep any surplus), while reimbursement requires you to front costs and submit receipts. Use our signing bonus tax calculator for similar lump-sum tax scenarios, or our gross-up calculator to reverse-engineer a target net amount.
Questions
Relocation bonus tax FAQ
Is a relocation bonus taxable in 2026?
Yes. Since the Tax Cuts and Jobs Act of 2017, employer-paid moving expenses and relocation bonuses are fully taxable for most employees. The only exception is active-duty military members who move under orders. Every dollar of a relocation bonus or reimbursement appears as taxable wages on your W-2.
How is a relocation bonus taxed?
A relocation bonus is taxed as supplemental wages. Federal income tax is withheld at a flat 22% (37% above $1 million), plus FICA: 6.2% Social Security up to the $184,500 wage base and 1.45% Medicare. State income tax applies on top. Combined withholding is typically 30% to 42%.
What is a gross-up on a relocation bonus?
A gross-up is when the employer increases the relocation payment to cover the tax liability so you receive the intended net amount. If you need $10,000 net and the combined tax rate is 35%, the employer pays approximately $15,385 — the extra $5,385 covers the taxes on the entire grossed-up amount. Not all employers offer gross-ups.
Can I deduct moving expenses in 2026?
No, unless you are an active-duty member of the Armed Forces moving under a military order. The TCJA suspended the moving expense deduction for all other taxpayers through at least 2025, and the One Big Beautiful Bill Act did not restore it. Some states still allow a state-level moving expense deduction.
Does a relocation bonus have a clawback?
Many do. Employers commonly require you to stay 1 to 2 years after relocation; leaving sooner triggers repayment of all or a prorated portion of the bonus. The repayment obligation is usually based on the gross amount. If you repay in the same tax year, it reduces your taxable wages; if in a later year, you may claim a deduction or credit.
- Sources: IRS — TCJA Sec. 11048 (moving expense exclusion suspended) · IRS Rev. Proc. 2025-32 (22% supplemental rate) · SSA 2026 wage base $184,500.
- 🔄 Last updated July 25, 2026 · Tax year 2026
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