My son will have an out of state internship this coming summer. He is offered housing options: A… Corporate housing B. Housing stipend ($1375 after tax). Company also offered airfare and rental car if needed. They also mention about “gross-up” taxation on aforementioned benefits to ease tax burden on interns and company.
Looks like the company will add those benefits as taxable income on W-2. Some previous interns posted their grudges online because corporate housing option (A) added 20K on their taxable income on W-2.
I searched the net, some peoples said companies add benefits on W-2 but they’re deductible from the bloated taxable income since the internship is a temporary employment (less than a year) and out of state, Others said it’s not deductible because it is less than 39 weeks employment.
I read Publication 463 : Travel, Entertainment, gift, and car expenses, but I’m still confused.
Should my son take the stipend or go with corporate housing? That 20K additional income is going to hurt a lot…LOL,
Can he find housing for $1400/month? If so, that seems like a better deal than $20k being added to his income but it might not be possible to find a decent situation for that amount. Is the Option A in a hotel or does it include meals (because $20k seems like a lot for 3 months).
It may be that they give the second option because some interns have other options like living with family or at a fraternity house at a nearby college, but if this company is in the middle of Oklahoma or Alaska, the company housing might be the cheapest for most looking for temporary housing.
It is on the outskirt of Boston. I check Airbnb and Craigslist (sublets section), the cost is about $1000-1200 but he will need a rental car. A rental car is not cheap for under 25 yrs old crowd. Public transportation is not an option due to location is just outside Boston or a big hassle. A corporate housing is usually located close to work place.
We don’t mind to pay taxes on a reasonable cost/benefit, but 20K for 12 weeks housing doesn’t sound right. My guess he will get an accommodation on par with a Residence Inn Marriott or Extended Stay. Three years ago he got more or less same offer , a corporate housing, different company but in the bay area, only 15 min.drive from home. We, parents, decided he should live at home. My son, obviously, didn’t like it. At that time though my consideration was I had concern that living arrangement where three dozens or so interns lived together, outside school, with considerably high disposable income, was prone to some shenanigans, a frat house atmospheres. He was a sophomore back then. I was partially right on that hunch ;-).
Should he took corp housing, he would be hit by higher tax on something that he didn’t see a penny of it (plus overpriced), as well as losing thousands in financial aid. Now is a bit different, he will be in graduate school in the Fall.
As long as that cost is mostly deductible, we’ll be ok. with corp housing. Question is whether it is deductible. With Trump’s new tax law, I heard that it is harder for employee to deduct travel/accommodation expenses.
I do not think person expenses (housing, travel) are deductible. I don’t think they ever were deductible.
He should ask how much the Option A taxes will be. The company has to know if they do this year after year. If it is a Long term Stay or hotel, then figure $100/nt=$700/wk x 12 wks =$8400
I think those interns postings are legit, because there is a statement written on company intern relocation policy :
“Tax Assistance” – Tax assistance in the form of gross up is provided to help you with the tax burden associated with receiving taxable relocation benefits".
@twoanddone- $ 8,400 is what I think a reasonable number. He will ask the HR on Friday regarding Housing Option A implication on his W-2, as well as rental car and airfare benefits.
If tax gross-up is available, what it the issue? (Tax gross up means that the company gives the intern a whole lot more money to offset income taxes – very generous, IMO.)
How does one get to $20k additional for summer housing?
btw: I believe that the deduction for Unreimbursed Business Expenses (old Form 2106) has been eliminated with the recent tax changes.
“How does one get to $20k additional for summer housing?”
Wouldn’t the tax gross up be the answer, if the actual cost is say $12K and that’s grossed up to $20K to cover the tax and SS due from the intern on the housing (i.e. the intern has another $8K reported as withheld on the W-2 to cover the subsequent tax bill).
Of course any potential knock-on effects on financial aid probably wouldn’t have been accounted for in the gross up…
But if the company is grossing up, you aren’t paying any taxes. (Or, in really, your son will pay very little in tax since they are giving him extra money. Yes, the extra money is itself taxable, but whether he owes any at all depends on the gross up formula and his marginal tax rate.)
Kathsj, I can’t really understand the need for a rental car. I live in the Boston area and the public transportation system should be helpful, along with Lyft or Uber, and bicycling too. Most young people in the area don’t have cars. Also I would think he could find a shared situation for the summer for $700-800. There are plenty of summer rentals in the area.
Any chance he will be near enough to any of the many colleges in the greater Boston area? Students are very often looking for subletters for the summer months. That is worth checking too.
Just curious - what area is just outside of Boston that doesn’t have public transportation? There are busses, subways, and commuter rail services etc. I would be a bit nervous about finding much below $1400 though a roommate situation or subleasing from a college student are possibilities.
Son’s future boss said it takes 2 hrs from Boston using any public transportation. About 30-40 min. driving,
Thus, he has to find housing really close to work place. Otherwise, rental car is way to go. His future boss already approved rental car usage. After checking on quotes for driver under 25 years old for 12 weeks (approx.$ 6 K -7K), he’d better make sure company will pay, at no cost to him. This is why we’re leaning to corp. housing, to minimize transportation cost. We would like to know if car rental is also treated like corp. housing, added to taxable income and be grossed up too. Even though employer will pay for all those costs in the end, we’d like to know where expectations should be set and be ready.
I had no idea Boston area has so many colleges around, it surely makes Summer sublet hunting easier. We find some rooms in craigslist & AirBnb that cost in the neighborhood of company stipend, $1400/month. We keep option B open just in case.
Any other info., other than Craigslist & Airbnb, to look for sublet around Boston?
I am so confused. Is this kid working outside of Boston?
Are there other interns?
And yes…there are 150,000 or so college students in the greater Boston area. Many rent off campus apartments…and are looking for subletters. My kid did it two summers…and cut the person a great deal.
OP- your son is surely not the only summer employee who plans to live in Boston and commute. Your son should get the contact information for a few of the other new employees, interns, summer employees, etc. and ONE of them (who probably owns a car already) can figure out a carpool protocol. I don’t know where you live- but Boston is FILLED with students 12 months a year, subletting each other’s apartments, squatting in a spare bedroom, car pooling and ride sharing out to boonies, etc. Your son won’t have any problem getting around, and really shouldn’t need more than a Zip Car one or twice for a Target run.
Make sure you understand what grossing up for tax purposes is- it means that even though it looks like your son is liable for the 20K in additional income, he’s actually only liable for his out of pocket rent costs- the “extra” money essentially covers his tax liability.
This entire arrangement seems extremely generous, given that some summer employees end up having to squat in a student apartment or an empty dorm room because they just can’t afford anything else. Your son has LOTS of options here! And a Residence Inn is VERY fancy for a grad student-- free breakfast, happy hour with free booze, usually a pool- in addition to whatever free food his company will be serving!
There’s a gazillion colleges in the Boston area. You could probably get some great suggestions from parents here (whose kids attended those colleges OOS) if you at least give a hint as to the city/town that he will be interning in.