Surprising costs that can break your budget when relocating — that may follow you after the move

Relocating for work can be an enormous decision, which can be made all the more appealing if your employers offer a generous relocation package.

However, relocation can mean far more than just a new ZIP code for some homeowners. The move can also upend their finances. 

Toni Frana, a career expert manager at FlexJobs, says that when considering a job that requires a relocation, it’s essential to understand all the ramifications of the move.

“Moving, of course, is expensive, but there may be additional expenses you need to consider as well,” she adds — expenses that will follow you for years after your move.

What relocation packages typically cover for homeowners

Evan Harlow, a real estate agent at Maui Elite Property, says that competitive relocation packages for homeowners should cover far more than just the moving truck.

He says that employers often pay for packing, transport, and short-term storage but can also go as far as to reimburse real estate agent commissions; cover part or all of closing costs; and provide temporary housing or paid house-hunting trips.

“Some larger corporations even offer home sale assistance programs — if your property hasn’t sold within a set window, the company will buy it to keep your move on track. I’ve seen this save clients months of double payments,” Harlow adds.

The surprising costs that can derail your budget

While these packages can be generous, they don’t always offset ongoing cost-of-living differences in the new location.

For example, Harlow says that clients he relocated from Tennessee to Boston — with their moving and closing costs covered—saw their property taxes triple and their grocery and utility expenses rise significantly.

“Without factoring in these ongoing differences, a ‘fully covered’ move can still feel like a pay cut,” he explains.

Indeed, some costs can completely upend your finances if not considered well in advance:

Capital gains tax

This can come with a massive bill for homeowners who sell their home at a profit.

The Internal Revenue Service has a so-called “$250,000/$500,000 home sale tax exclusion.”

This means that if you have a capital gain from the sale of your home, “you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse,” according to the IRS.

This rule, however, comes with a caveat. You can qualify if you not only owned the home, but also used it “as your main home for a period aggregating at least two years out of the five years prior to its date of sale.”

That’s why Rep. Marjorie Taylor Greene (R-Georgia) recently introduced the No Tax on Home Sales Act. This bill would eliminate the federal capital gains tax on the sale of a primary residence.

Property taxes

Property taxes can widely differ across the country.

For instance, Ohio‘s average property tax rate is 1.52%, compared to 2.13%  in New Jersey, the highest rate in the nation, according to The Tax Foundation.

Consider if you made a lateral move, with the value of your home meeting the current national average ($439,450) and the price of your new home the same. Your property taxes in New Jersey would be approximately $2,682 higher per year than in Ohio for the same home value.

Mortgage rates

Many homeowners have enjoyed the freedom of the ultralow rates on the mortgages they took out a few years ago.

Relocating could mean taking on a mortgage at current higher rates, raising monthly payments significantly.

For instance, the 30-year average mortgage rate is 6.63% for the week ending Aug. 7, according to Freddie Mac. In comparison, it stood at 2.88% on Aug. 6, 2020.

Possible HOA fees in the new location

When shopping for a new home, keep HOA costs in mind, advises finance expert Austin Kilgore, analyst with the Achieve Center for Consumer Insights, part of digital personal finance company Achieve.

Fees can range from a few hundred dollars a month to over $1,000 in certain regions and luxury markets.

“Incorporate that into your budget as you determine what kind of home your relocation package will really let you purchase,” he says.

Insurance

Another significant expense, which can come as a surprise, is the cost of insurance.

Kilgore notes that homeowners insurance varies widely nationwide and includes different types of houses.

“You may need to look into flood, fire, or other hazard insurance,” he notes.

Can you negotiate relocation perks to cover these costs?

Harlow says you can negotiate relocation packages, especially for senior or hard-to-fill positions.

“If you can come up with the numbers from a destination market, even better. Demonstrate how property taxes, HOA dues, or mortgage rates will change your monthly payment costs and ask for a concession,” he advises. “With a clear financial picture, I have seen employers agree to pay the first year’s difference in property taxes or do a mortgage rate buydown.”

Harlow adds that he has helped clients secure lump-sum cost-of-living adjustments, which are essentially a cash cushion to cover increased expenses for the first 12 to 24 months.

“Mortgage rate buydown assistance is another tool, letting you lock in a lower rate without taking the hit yourself,” he explains.

Companies can also be more flexible when it comes to what they see as “critical roles.”

“I’ve seen relocation perks stretch far beyond the standard package — sometimes even covering ongoing cost-of-living differences for multiple years. For these roles, companies view flexibility as an investment in securing the right talent,” says Harlow.