Moving Expense Tax Deductions

There are various deductions that are available for an individual who is preparing a tax return. Today, we will talk about moving expense, who are eligible for it, and the amounts that should be claimed for these deductions when you file your tax return.

Conditions on eligibility

Primarily, you must be a deemed or factual resident of Canada, and you are relocating to commence business or employment. The new residence must be at least 40 Kilometers closer to your place of work or post-secondary institution than your old residence, and the new residence must also be the place where you will ordinarily reside.

Typically, all of the cost of the activities that you incurred during your move is eligible. The general types of expenses include: transportation, travel expense, temporary living and meal expenses. Costs incurred related to the sale and purchases of the residences are also deductible. There are also lists of expenses that are non-deductible. For instance the cost to renovate your previous residence, travel expense for house-hunting trips before you moved, travel expenses for job hunting, and mortgage default insurance are not eligible. You can visit the CRA website for a complete list of the allowable expense.

Limitations on moving expense deductions

You can claim moving expenses up to the net eligible income, or scholarships, bursaries, and grants, while excess balance can be carried into future years. The amount cannot be deducted against employment insurance benefits or investment income. In some cases your employer may provide the option to reimburse or provide a moving allowance. If you are reimbursed for a portion or the entire amount of the moving expense either by your employer or the government, you are required to deduct the portion that is reimbursed from your eligible moving expenses.

You must also take into the account of when the move will take place. If there are expenses incurred in the year after the move, then you are required to deduct the expenses in the year the expenses are incurred. Moving expenses cannot be carried back. Should you have moving expense incurred towards the end of the year before you begin work at the new location, you can carry forward and deduct the expenses against the income earned at the new location in the following year.

While the move does not have to be strictly within Canada to be eligible to deduct, there are futher implications to understand if you are relocating outside of Canada. The following are the cases where you are eligible to claim the expenses:

-if you are a full-time student moving to Canada or if you are a deemed resident

-if you are a full-time student moving from Canada, or if you are a deemed resident and you moved from the place you ordinarily reside to another place you will ordinarily reside

-if you are moving from two locations outside of Canada, you must be a deemed resident, and you moved from the place you ordinarily reside to another place you will ordinarily reside

How to go about deducting your moving expense

You can find the T1-M Moving Expense Deduction form on CRA’s website . You will need to complete this form and attach it with your tax return when you file your taxes. While most expenses can be claimed by the full amount, there are some specific rules in the calculation of Travel Expense, and Meals and Entertainment Expense. There are two methods of calculating these expenses. They are the detailed and simplified method. The detailed method will allow you to use the actual amounts you have spent on the eligible costs (travel expenses such as gas, and meals expenses). However it is mandatory to keep your receipts.

The simplified method utilizes CRA’s implied rates for travel and meal expenses. In Ontario, travel expense between new and old residence is recorded at 57.50 cents per kilometer travelled (different rates apply for other provinces, see table below). Meals are $17 per meal and it can be taken every 4 hours up to 3 times a day. While the simplified method does not require receipts, it is recommended to keep proper documentation in case the CRA wants to prove the costs do exist. The CRA recommends keeping all of your receipts. While you are no more likely or less likely to be audited by the CRA when deducting moving expenses, it is our suggestion to prepare the proper documentation when applying the deduction.

Moving expense can be claimed in various situations, and it is important from a tax planning perspective to know about these deductions. For more information, you can visit the CRA’s website and this article on are moving expenses a tax deduction?.

ABOUT THE AUTHOR

ALLAN MADAN

CPA, CA

Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.

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