If your new job offers the choice of a relocation package, here’s everything you need to know about the costs of relocating, according to Redfin’s Chief Economist, Daryl Fairweather.
With tech giants opening campuses in new places like Crystal City, Nashville and Austin, and the rising costs of living in many coastal cities, the idea of relocating to a shiny new job in a relatively affordable city to start over can become increasingly attractive.
So say you land one of these coveted gigs–congrats!–does that mean the hard work is over?
Not really. Relocating can be daunting. Will you hire movers? Do you need to buy a car? Where will you live on day one? These questions don’t always have easy answers, but your new employer may present you with several choices to help offset the burden.
Redfin’s chief economist Daryl Fairweather, who relocated from San Diego to Seattle for her career, weighs in with tips on what to do if that happens, and how to choose between accepting a lump sum bonus to cover relocation costs, or itemizing each step of the process for reimbursement, when offered.
Whether you’re thinking about applying for a job in a new city, or already landed one, here are Daryl’s answers to common questions around how to make the smartest move on a relocation package, both in career and housing.
What happens when you decide to relocate for a job?
“Now that you decided to accept that job offer in a new city, it’s time to switch your attention to all of the temporary hassles associated with moving. Many companies offer relocation packages to alleviate some of those hassles. Some companies offer cash bonuses, others will either directly handle or reimburse moving expenses, and some companies give you both options. If you are deciding whether to accept a cash bonus or have your moving expenses reimbursed by the company, know that they may be taxed differently because a relocation bonus is considered income. You might pay more taxes if you accept the cash bonus over the reimbursement.”
How does reimbursement work?
“When I moved from San Diego to Seattle, I chose a reimbursement package, by which my new employer agreed to pay for the individual expenses of several different needs, rather than handing me one large check. I selected that option because it was a relatively complicated move for my family–I was moving with my husband, mom and our three dogs and required relocation assistance in several areas. I needed help selling our home in San Diego, which included freshening up our landscaping and a new paint job. I paid for those cosmetic updates upfront and submitted receipts to be reimbursed. Likewise, I took a weekend trip to Seattle to find a temporary rental, and was later reimbursed for expenses like transportation and hotel stays.
Other needs were handled exclusively by my employer and I never saw a bill, such as contracting movers and hiring them to handle the packing. Moving was stressful, but knowing I would be reimbursed for expenses for things like gas, tolls, and hotel stays with pet fees, was a huge relief.
These were all expenses I was offered, but each relocation package is different. Be sure to talk through the process with your new employer and ask questions to determine what is and is not included.”
What happens if I take the cash bonus?
“If you accept the cash bonus, all of that money may be taxed. But after taxes, you can spend that money however you wish. You could give away all of your belongings to charity, drive yourself to your new city, and fill your space with brand-new furniture. Or you could pocket the money to save for later, if you wanted.
But before you keep the cash, consider how your behavior might change if you accept cash over reimbursements. When you accept cash, that money becomes your own to spend or to save, and every purchase made for moving will directly impact your own wallet. Therefore, when you choose to be reimbursed for expenses over receiving cash you will likely worry less about being frugal.”
Bottom line: Is it better to take a cash bonus or expense reimbursement?
“Moving expenses can add up quickly, especially if you are selling your home to move. Landscaping, painting, and home-staging can cost up to $3,000, or more, depending on the level of work needed. Additionally, a trip to your new city to find new housing could cost up to $2,000, as well, and full-service movers for a cross-country trip could cost upwards of $10,000.
Also take into account that the real estate industry continues to advance and offers a wider range of solutions for selling your home such as an iBuyer program like RedfinNow.
As a rule of thumb, only take the cash bonus if you are moving alone and currently renting a small apartment. If you have a home, a lot of stuff, or pets to move, do yourself a favor and take the reimbursements.”
This post first appeared on Redfin.com. To see the original, click here.