Quick Tax Question....

[BHeemsoth]

Hey guys,

For an internship I worked at this summer I was given a $3,000 bonus to cover relocation and moving costs.

I am currently trying to plan my finances for the rest of the year and was wondering what type of taxes I'm going to end up paying on this. Will I pay the normal tax rate, or an inflated rate (45%)?

FWIW, I'm in Massachusetts.

Thanks,
Brian

 

[axelfox]

They didn't withhold any taxes for you?

 

[BHeemsoth]

Originally posted by: axelfox
They didn't withhold any taxes for you?

No. I wish they did though....

EDIT: To clarify, the bonus was disbursed through a third party relocation assistance firm. My employer did withhold taxes on my labor.

 

[MrDudeMan]

To give you a frame of reference, I was also given a relocation bonus ($3100) for my internship and here are the numbers:

Gross Pay: 4942.85
Net Bonus: 3100.00
......Taxes: 1842.85

In other words, it was taxed around 37%.

I don't know if the same thing will apply to you, but if it does, then you can expect to owe $1110 in tax on that $3000.

 

[FoBoT]

did you keep track of your actual relocation and moving costs?

 

[MrDudeMan]

Originally posted by: FoBoT
did you keep track of your actual relocation and moving costs?

That's a good point. All of the costs of moving are deductible.

 

[mugs]

It is a myth that you pay a higher tax rate on bonuses. They are typically withheld at a higher rate, but the tax you end up paying is whatever your marginal tax rate is.

 

[msparish]

Originally posted by: MrDudeMan

Originally posted by: FoBoT
did you keep track of your actual relocation and moving costs?

That's a good point. All of the costs of moving are deductible.

They are only deductible if you work in your new location for a certain period of time. I can't remember exactly, but it is longer than 3 months (it's more on the order of a year or two).

 

[BHeemsoth]

Originally posted by: MrDudeMan

Originally posted by: FoBoT
did you keep track of your actual relocation and moving costs?

That's a good point. All of the costs of moving are deductible.

I didn't really have any costs.

I just used it to pay for my rent for the summer, at an on-campus apartment. I handled all my own moving expenses (clothes mostly) from home back to school.

 

[BHeemsoth]

Originally posted by: mugs
It is a myth that you pay a higher tax rate on bonuses. They are typically withheld at a higher rate, but the tax you end up paying is whatever your marginal tax rate is.

Can anyone confirm this?

 

[FoBoT]

you pay what you pay, them withholding at a certain rate isn't related to your taxable income, they have no way to know what that will be

if you had no expenses, then basically it is extra pay, you'll have more taxable income than last year

 

[Gunslinger08]

Originally posted by: rpbri2886

Originally posted by: mugs
It is a myth that you pay a higher tax rate on bonuses. They are typically withheld at a higher rate, but the tax you end up paying is whatever your marginal tax rate is.

Can anyone confirm this?

It's just standard income. Bonus money and salary/hourly money is no different when it comes to tax time.

 

[BHeemsoth]

That's excellent news.

That will save me plenty of money when I'm poor next semester, heh.

Thanks ATOT!