Did you know that some of the costs you incur in connection with relocating to a new job in Canada are tax-deductible?
Moving, in general, comes with a slew of different kinds of anxieties, as well as life changes and often significant monetary expenses. But, if you’re starting a new job in a new place, can you deduct your moving expenses? If so, what can you deduct? This is what we are going to take a closer look at here.
Tax Deductible Moving Expenses: The Basics
You may be qualified for moving expenses tax deductions if you are a Canadian resident who is compelled to change residence owing to a new job or a change in employment location.
There are conditions, of course. The Income Tax Act stipulates that you must relocate at least 40 kilometres closer to your new employment or business location to be eligible for these tax deductions. This could imply relocating to a new province, or you could also be moving within the same province; the only stipulation is that your new location is at least 40 kilometres closer to your new job than your old one.
Here’s an example: Your company is opening a new office in Kitchener, but you currently live in Toronto. As the two are some 80-90 kilometers apart (depending on where in KW you choose to move to) moving to the Waterloo Region will make the most sense, and you'll be able to take advantage of the tax deductions we’ll be discussing here as they apply to you, even though both are in Ontario and often considered reasonably close to one another.
You can claim the moving expenses tax deduction whether you are a homeowner or a tenant—the claims are essentially the same if you meet the requirements. One of the mistakes many people do make is failing to understand that only relocating homeowners are entitled to tax breaks if they make an employment-related move. However, it’s the act of moving – and its many related expenses – that we are talking about here, not the home you are moving to.
What Moving Expenses are Tax Deductible When Relocating for Work?
The following are examples of tax-deductible moving expenses:
- Airfare, train/bus tickets, vehicle rentals, and personal vehicle fees. You can also include the cost of gas and, should the worst happen, and your car breaks down on route, the cost of any repairs.
- Movers or the cost of your own self-moving expenses.
- Storage costs for household goods.
- Expenditures of meals and lodging near the old or new residence for up to 15 days.
- Cancellation of a lease on a rental home
- The costs of selling your previous residence, including Realtor commissions.
- The cost of legal expenditures, transfer taxes, and registration taxes about the new residence if you are selling the old residence (excluding HST and other sales taxes which are not deductible).
- Interest on the mortgage, property taxes, insurance, and the cost of heating and utilities for the previous dwelling, up to $5,000. The former residence cannot be rented to a tenant or occupied by you or your household members during the time that these expenses are expended. During this time, you should also be making reasonable efforts to sell the property.
- The costs of updating basic legal documents, replacing driver’s licenses, and connecting and disconnecting utilities to your new residence.
It’s worth noting here that if your employer reimburses you for some of your moving expenses, you should keep these in mind when figuring out your deductions, as you can’t claim what someone else ultimately paid!
Tax Tips for Relocating Employees
Figuring out just which moving expenses really qualify can be tricky, and no one wants to get it wrong! Here are some tips to keep in mind.
Tax Tip #1: You don’t need receipts to deduct personal vehicle and dining costs. The cost per kilometre is determined by the region or territory from which you begin your journey. For example, you can deduct 57 cents per kilometre for driving your own car to the new location if you live in Ontario.
You can also deduct $51 per day for each household member for meals consumed during the move, up to a maximum of 15 days. Every year, the CRA adjusts the standardized meal and travel expense amounts.
Tax Tip #2: Each move is considered separately. Even if it happened in the same tax year as the first move, a second move back to your previous location and employer would qualify for moving expenditure tax deductions as well.
Tax Tip #3: If you’re selling your home to move to a new job, deduct the selling costs as moving expenses rather than add them to the home’s cost for capital gains reasons. You will get a better deduction on your income tax return if you do it this way.
Tax Tip #4: The foregoing expenses are not all-inclusive. If you suspect you have extra bills and expenses that may qualify as moving expenses, talk to your accountant.
Tax Tip #5 The Canada Revenue Agency does not allow for the reimbursement of some expenses. The following are some of these limitations:
- Costs of renovations to make the previous home more marketable – for example, staging your home may help it sell, but the cost of doing so is not tax-deductible.
- losses from the previous residence’s sale.
- Costs of job hunting and house hunting (including trips to a different city/province to look for a place to live).
- The cost of mail forwarding
- Mortgage default insurance
Final Words
Need more help? To help ensure that you get all the tax breaks you are entitled to while staying on the right side of the CRA, if you have moved for work, let Filing Taxes help you prepare your tax return to ensure you get everything right!
Contact us today and let’s discuss just how we can help you. Filing Taxes concisely deals with several complex issues; it is recommended that accounting, legal, or other appropriate professional advice should be sought before acting upon any of the information contained therein.
Our experienced and professional team at Filing Taxes is here to set you on the right path considering your personal business situation. Feel free to reach out to Filing Taxes at 416-479-8532. Schedule an NTR engagement appointment with us and take the first step towards proper management of your finances.
Disclaimer: The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.