Updated: Mar 3, 2022
Moving to a new home can be an exciting time in our lives, and it can be expensive as well. Fortunately, you may be able to reduce your tax bill by claiming moving expenses in respect of an eligible relocation.
An eligible relocation of an employee and a self-employed individual is a move in respect of which all of the following conditions are met:
a) it occurs to allow the individual to carry on a business or to be employed at a new work location in Canada unless the individual is absent from Canada, but resident in Canada;
b) before the move the individual ordinarily resided at an old residence and after the move the individual ordinarily resided at a new residence;
c) both the old residence and the new residence are in Canada unless the individual is absent from Canada, but resident in Canada; and
d) the move allows the individual to be at least 40 kilometers closer to the new work location based on the shortest normal route available.
An eligible relocation of a student is a move in respect of which all the following conditions are met:
a) it occurs to allow the student to be in full-time attendance (at least 60% of the regular course load for the program) enrolled in a program at a post-secondary level at a location of a university, college or other educational institution whether in Canada or elsewhere;
b) before the move, the student ordinarily resided at an old residence and after the move, ordinarily resided at a new residence;
c) the old residence and the new residence, or one of these residences, are in Canada unless the student is absent from Canada, but resident in Canada; and
d) the move allows the student to be at least 40 kilometers closer to the educational institution based on the shortest normal route available to the travelling public.
There must be a connection between the move and the individual’s work or studies. Whether or not such connection exists must be examined on a case-by-case basis. This can occur when an employee is required to transfer to a new location or if a self-employed individual is required to move closer to a new market. A move that is solely for personal reasons is not an eligible relocation, even if the individual subsequently starts a new job, business, or educational program near the new residence.
The concepts of “ordinarily resided” and “absent from Canada, but resident in Canada” are based on an analysis of an individual’s residency. I would be happy to advise on these concepts separately.
Expenses must be incurred by the individual. If any reimbursements or allowances were received, those amounts must be included in income for the year to claim the moving expenses. The total expenses deducted in the year must not exceed the income earned from the new employment or self-employment, or any taxable scholarships, fellowships, research grants, awards or prizes received by the student. Expenses in excess of this amount can be carried forward to the subsequent year. Expenses can not be claimed until they are paid, and the eligible relocation has occurred.
Eligible expenses include:
a) travel costs, including reasonable amounts spent for meals, lodging and the use of a vehicle incurred in the process of moving the individual and members of the individual’s household from the old residence to the new residence.
b) the cost of transporting and storing household effects in the process of moving from the old residence to the new residence.
c) the cost of meals and lodging incurred near the old residence or the new residence for a period not exceeding 15 days.
d) the cost of cancelling a lease for the old residence.
e) costs related to the sale of the old residence including advertising, notary or legal fees, real estate commissions, and mortgage prepayment penalties.
f) legal fees related to the purchase of the new residence as well as taxes, fees, and duties (other than any goods and services tax or value-added tax) on the transfer or registration of title to the new residence. These costs are only eligible if the individual or the individual’s spouse or common-law partner is the owner of the old residence, alone or jointly and the old residence is sold because of the move.
g) interest, property taxes, insurance premiums and the cost of heating and utilities in respect of the old residence. These expenses are limited to those incurred for the period in which reasonable efforts are made to sell the old residence while it is unoccupied, to a maximum of $5,000.
h) the cost of changing legal documents to reflect the address of the individual’s new residence, replacing drivers’ licenses and non-commercial vehicle permits as well as connecting or disconnecting utilities.
A simplified method is available to calculate the travel and meals expenses per a) and c) above. Travel expenses can be calculated based on a reasonable per kilometer rate based on the distance between the old residence and the new residence. Each province sets their own per kilometer rate on an annual basis. Detailed receipts do not need to be saved if the simplified method is used, but you need to retain documentation to support the timing of the move and distance travelled.
Moving can be both costly and stressful. You may be able to offset your costs by deducting your expenses given the right circumstances.
For more information, please contact firstname.lastname@example.org or 1 844-GYTD-CPA