Relocation assistance policy template for new hires and transfers, with the 2026 tax and repayment rules

A relocation assistance policy says who qualifies for help moving to take a job, what form the help takes (a lump sum, reimbursement of receipts, or a move the company manages), which costs are covered and up to what limit, how it is taxed, and whether any of it must be paid back if the person leaves early. As of October 2026, employer-paid moving costs are taxable wages for nearly every employee: IRS Publication 15-B for 2026 says P.L. 119-21 "permanently eliminates the exclusion" for qualified moving expense reimbursements, with exceptions only for certain military and intelligence community moves (IRS Publication 15-B (2026)). Repayment clauses are now restricted in California for contracts signed on or after January 1, 2026, and in New York from December 19, 2026.

This page gives a copy-ready policy with [bracketed] fields, the offer-letter clauses that go with it, the tax and repayment rules with their sources, and an invented worked example. It is for moves after an offer is accepted. For costs a candidate incurs traveling to an interview, which the IRS treats differently, use the candidate interview travel reimbursement policy. Not legal or tax advice.

What should a relocation assistance policy cover?

• Eligibility: which roles, levels and distances qualify, and whether internal transfers are included.
• The type of support: lump sum, reimbursement up to a cap, or a managed move through a relocation vendor.
• Covered and excluded costs, each with a limit.
• Timing: when the money is paid and how long the person has to use it.
• Tax: that the support is taxable wages, and whether the company grosses it up.
• Repayment: if any, how it is prorated, which exits trigger it, and the state law limits.
• Approvals and records: who signs off on exceptions and where receipts are kept.

Lump sum, reimbursement or managed move: which should you offer?

Whatever you choose, put the figure or the tier in the offer approval before the offer call. Our offer approval form has a relocation line for exactly this.

Which moving costs do relocation policies usually cover?

The dollar amounts are placeholders. Set them from quotes for your common routes, not from a national average.

The relocation assistance policy template

RELOCATION ASSISTANCE POLICY
[Company name]   Owner: [HR lead]   Effective: [date]   Version: [n]

1. PURPOSE
To help new hires and transferring employees move to take a role
with [Company], on consistent terms, at a cost approved in advance.

2. ELIGIBILITY
Relocation support may be offered when:
- the role is based at [location(s)] and requires on-site work
  [at least X days a week]; and
- the person's new commute would be more than [50] miles longer
  than from their current home; and
- support is approved on the offer or transfer approval before the
  offer is made.
Eligibility is decided per role. Being offered support for one role
does not create a right to it for another.

3. TYPES OF SUPPORT
Tier 1 [levels]: lump sum of [$amount], paid through payroll
  [with the first paycheck / within 30 days of the start date].
Tier 2 [levels]: reimbursement of eligible costs up to [$amount],
  with itemized receipts.
Tier 3 [levels]: managed move through [vendor], covering the
  eligible costs in section 4 up to [$amount] or as approved.

4. ELIGIBLE COSTS (Tiers 2 and 3)
- Packing, shipping and insurance of household goods: one move.
- One-way travel for the employee and household members.
- Temporary housing: up to [X] days.
- One house-hunting trip: up to [X] nights.
- Storage: up to [X] days.
- Lease-break penalty: up to [X] months' rent.
- [Home sale / purchase closing costs: Tier 3 only, up to $amount.]
Not covered: [list].

5. TIME LIMITS
Costs must be incurred within [6] months of the start date and
claimed within [30] days of being incurred. Unused amounts lapse.

6. TAX
Relocation payments, reimbursements and amounts paid to vendors on
the employee's behalf are taxable wages and are reported on Form W-2,
with withholding. [Company] [does / does not] gross up relocation
payments to cover [federal / federal and state] income tax.

7. REPAYMENT [delete this section if none]
If the employee resigns, or is terminated for [misconduct as defined
in the separate repayment agreement], within [12] months of the start
date, they agree to repay a prorated share of the relocation support:
the gross amount x (months remaining / [12]). No repayment is due if
[Company] ends employment for any other reason. Repayment terms are
set out in a separate written agreement signed before any payment and
apply only where and to the extent the law of the employee's work
location allows. No interest is charged. Repayment will not be taken
by deduction from wages unless [Company] confirms the deduction is
lawful in that state and the employee authorizes it in writing.

8. INTERNAL TRANSFERS
Employees transferring at [Company]'s request receive [the tier for
their level]. Employees who request a transfer for personal reasons
[are not eligible / receive Tier 1 only].

9. APPROVALS AND EXCEPTIONS
Exceptions above these limits need written approval from [role]
before they are offered. HR keeps receipts and approvals for [X]
years with payroll records.

10. CONTACT
[HR contact name, email]   [Relocation vendor contact]

What should the offer letter say about relocation?

The policy sets the rules; the offer letter states what this person gets. Keep the clause short and point to the policy and to any separate repayment agreement. The general structure of the letter is in our offer letter template.

LUMP SUM
To help with your move to [city], [Company] will pay you a one-time
relocation payment of $[amount], less applicable withholding, with
your first regular paycheck. This payment is taxable income.
[Repayment terms are set out in the attached Relocation Repayment
Agreement, which you may take [five] business days to review.]

REIMBURSEMENT
[Company] will reimburse eligible moving costs up to $[amount] under
our Relocation Assistance Policy, attached. Reimbursements are
taxable income and will be processed through payroll.

MANAGED MOVE
[Company] will arrange and pay for your move through [vendor] under
Tier 3 of the attached policy, up to $[amount]. The value of these
services is taxable income to you[, and [Company] will gross up the
federal income tax on it].

NO REPAYMENT VERSION
This relocation support is yours to keep whether or not you stay
with [Company] for any particular period.

For an existing employee moving with a promotion, the internal promotion offer letter has a relocation variant.

How is relocation assistance taxed in 2026?

Federal law used to exclude qualified moving expense reimbursements from wages under 26 U.S.C. 132(g). The exclusion was suspended from 2018, and P.L. 119-21, the One Big Beautiful Bill Act, made the suspension permanent. As of October 2026, the statute keeps the exclusion only for active-duty Armed Forces members moving under a military order for a permanent change of station, and for intelligence community employees or new appointees moving because of a change in assignment (IRS Publication 15-B (2026), What's New). What that means in practice:

• All forms of support are wages. Publication 15-B states the general rule that "any fringe benefit you provide is taxable" unless the law excludes it. That covers lump sums, reimbursements and amounts paid straight to a moving company or landlord on the person's behalf.
• Withholding. IRS Publication 15 (2026) lists "payments for nondeductible moving expenses" as supplemental wages, and says the withholding rate on supplemental wages remains 22%, or 37% on supplemental wages above $1 million in a calendar year (IRS Publication 15 (2026)). Social Security and Medicare taxes apply as well.
• Gross-up is a choice. No federal rule requires it. If you gross up, say whether it covers federal income tax only or state tax too, and that the gross-up is itself taxable.
• Interview travel is different. Reimbursed costs of interviews held at the employer's invitation are not wages (see the travel policy). A house-hunting trip after acceptance is part of the move, so treat it as relocation and ask your payroll provider.

State income tax treatment varies by state; check with your payroll provider or tax adviser.

Can you make a new hire pay relocation money back?

Repayment ("clawback") clauses are common, but they are now one of the most regulated parts of a relocation package. As of October 2026:

• California. AB 692 (Chapter 703, Statutes of 2025) added Business and Professions Code section 16608 and Labor Code section 926. For contracts entered into on or after January 1, 2026, a term that requires a worker to pay a debt, including "employment-related costs," if employment ends is unlawful and void, unless an exception applies. One exception covers a "discretionary or unearned monetary payment, including a financial bonus, at the outset of employment that is not tied to specific job performance," but only if the repayment terms are in a separate agreement, the worker is told of the right to consult a lawyer and given at least five business days, repayment is prorated with no interest over a retention period of no more than two years, the worker may choose to defer the payment to the end of the period with no repayment duty, and repayment is due only after a voluntary resignation or a termination for misconduct. Another exception covers contracts for the lease, financing or purchase of residential property. A violation costs actual damages or $5,000 per worker, whichever is greater, plus attorney's fees. The statute does not name relocation, so whether a relocation payment fits an exception is a question for counsel.
• New York. The Trapped at Work Act, Labor Law article 37, is marked "Effective December 19, 2026" on the New York Senate's copy of Labor Law section 1052. It voids employment promissory notes but allows an employer to require repayment of a "financial bonus, relocation assistance, or other non-educational incentive" not tied to specific job performance, except where the employee was terminated for a reason other than misconduct or the job's duties were misrepresented.
• Everywhere: getting the money back. Under the federal rule in 29 CFR 531.35, wages must be paid "free and clear," so a deduction for the employer's benefit cannot cut into minimum wage or overtime. Some states are stricter: California's Labor Code section 221 makes it unlawful for an employer "to collect or receive from an employee any part of wages theretofore paid." Ask for repayment by agreement and invoice rather than a final-paycheck deduction.

A fairness point the new hire will notice: if they repay in a later tax year, they have already paid income tax on the money. IRS Publication 525 says a repayment of $3,000 or less of income included in an earlier year cannot be deducted, while a larger repayment may qualify for an itemized deduction or a credit. Some employers therefore ask only for the net, after-tax amount, or forgive repayment after a short period. If repayment is a deal-breaker for a candidate, see the sign-on bonus agreement template, which covers the same retention mechanics in more detail. Not legal or tax advice.

A worked example

Common mistakes with relocation packages

If a relocating hire's offer has to be withdrawn after they have started moving, see how to rescind a job offer on covering costs already incurred. This page is general information as of October 2026, not legal or tax advice.