Settling In Allowance

Key Takeaways

• A settling-in allowance helps cover relocation expenses for a new job move.
• Expenses may include temporary lodging, meals, and storage of belongings.
• Relocation expenses became taxable due to the Tax Cuts and Jobs Act of 2017.
• Employers may also provide relocation allowances for house hunting and moving costs.
• Military members can exclude certain moving reimbursements from taxable income.12

What Is a Settling-In Allowance?

If you're relocating for work, a settling-in allowance can help cover relocation expenses like temporary lodging, meals, and storage. It may be paid as a lump sum or reimbursed with receipts, with tax implications since the Tax Cuts and Jobs Act made many employer moving benefits taxable for most workers.

How Settling-In Allowances Support Employee Relocation

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.

Tax Implications of Settling-In Allowances

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 December 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.1

Fast Fact

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.2

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.