Settling-In Allowance
A settling-in allowance is money provided as part of relocation expenses to a person who has transferred locations or moved as part of accepting a new job. Per the rule, there are two situations under which employers can claim deductions: An employer pays a third party in 2018 for qualified moving services provided to an employee prior to 2018. An employer reimburses an employee in 2018 for qualified moving expenses incurred prior to 2018. Generally, active-duty members of the United States Armed Forces can still exclude qualified moving expense reimbursements from their income if they move pursuant to a military order to a permanent change of station and the moving expenses would qualify as a deduction if the member didn’t get a reimbursement. Effective Jan. 1, 2018, the Tax Cuts and Jobs Act of 2017 suspended moving expense deductions along with the exclusion for employer reimbursements and payments of qualified moving expenses. Relocation expenses often include transportation, accommodation, and meals for house hunting trips; temporary lodging upon arrival in the new location; as well as moving company and storage costs. In addition to a settling-in allowance, they might award a relocation allowance or direct reimbursement for relocation expenses.
What Is a Settling-In Allowance?
A settling-in allowance is money provided as part of relocation expenses to a person who has transferred locations or moved as part of accepting a new job. A settling-in allowance may be given as a lump sum or later reimbursed by the current or new employer upon submission of related receipts. It might be used for expenses such as temporary lodging, meals, storage of personal belongings, and other incidental costs of settling in at a new location. Under some circumstances, relocation expenses may be considered taxable and included on an employee's W2.
Understanding Settling-In Allowance
Companies often assist employees who have to move for work, whether because of a transfer or a new job offer. In addition to a settling-in allowance, they might award a relocation allowance or direct reimbursement for relocation expenses.
Relocation expenses often include transportation, accommodation, and meals for house hunting trips; temporary lodging upon arrival in the new location; as well as moving company and storage costs. Other covered expenses may include costs associated with selling and acquiring a primary residence, such as real estate commissions and other closing costs. For temporary relocation, a company might provide both a settling-in allowance and a living allowance.
Taxes and Settling-In Allowance
Up until 2018, an employer could claim deductions for relocation expenses as qualified moving expenses. As part of the Tax Cuts and Jobs Act (TCJA) reform passed by former President Trump's administration in Dec. 2017, employers can no longer claim those deductions. They are required to include all moving expenses claimed by an employee as part of their wages.
Per the rule, there are two situations under which employers can claim deductions:
Generally, active-duty members of the United States Armed Forces can still exclude qualified moving expense reimbursements from their income if they move pursuant to a military order to a permanent change of station and the moving expenses would qualify as a deduction if the member didn’t get a reimbursement.
Example of Settling-In Allowance
An example of the offering of a settling-in allowance would be when a company establishes a branch or division in a different state and is offering relocation to existing employees in order to have an experienced workforce in place. As part of the relocation incentive, an employer would cover travel and moving costs, as well as assistance with selling an existing property and purchasing a new one. A settling-in allowance would be in addition to these other incentives.
Related terms:
Incidental Expenses (IE)
Incidental expenses (IE), also known as incidentals, are tips and other small costs ancillary to a business expense. Learn when incidentals are deductible. read more
IRS Publication 516
IRS Publication 516 is published by the IRS and details the income tax requirements for U.S. citizens working for the government in a foreign country. read more
Mergers and Acquisitions (M&A)
Mergers and acquisitions (M&A) refers to the consolidation of companies or assets through various types of financial transactions. read more
Moving Expenses
Moving expenses as tax-deductible costs have been abolished for most of us but members of the U.S. military and their families may still qualify. read more
Non-Accountable Plan
A non-accountable plan is a way to provide employees with an allowance for business expenses or travel that does not need to be justified to an employer. read more
Out-of-Pocket Expenses
Out-of-pocket expenses are costs you pay from your own cash reserves, such as medical care and business trips, that may be reimbursable. read more
Transportation and Storage Costs
Transportation and storage costs are a category of deductible expenses now available only to active-duty members of the U.S. military. read more
W-2 Form Overview: Line-by-Line Guide to Form W-2
Form W-2 reports an employee's annual wages and the amount of taxes withheld from their paycheck. Here's why you need a W-2 and how it is used. read more