For many Canadian families, moving can be an exciting adventure. The thrill of a new location brings new friends and new experiences. But moving can also be an expensive endeavour. Bills for moving services, real estate commissions, legal fees, and changing utility accounts add up quickly.
The good news is that you may be eligible for a tax break. Taxpayers relocating to pursue full-time post-secondary education, employment, or to improve accessibility for physically impaired individuals may qualify for a tax deduction to help offset moving expenses.
Students Moving for Post-Secondary Education
Full-time students moving at least 40 km closer to their post-secondary institution can deduct eligible moving expenses from certain taxable income including any fellowships, grants for research, scholarships, bursaries, and select academic prizes.
Students Moving for Work
Are you a student working your way through school? If the distance between your residence and workplace is at least 40 kilometres, students who move to work can deduct eligible moving expenses from the income earned during the employment. Eligible work includes co-op employment, summer employment or running a business. Students can claim the deduction for moving at the start of each academic period, and co-op students can also claim costs incurred when moving back from a work period.
Moving for Mobility Issues
The physically-impaired may qualify for a tax deduction when moving to a more accessible home that improves their ability to function independently. Claim up to $2,000 ($2,518 for Ontario residents) of eligible moving expenses when relocating a person suffering from a physical development or prolonged impaired mobility. To be eligible, these expenses can’t have been claimed on a tax return as regular moving expenses for work or education reasons.
Moving for Work
Work-related moving decisions are tough for many Canadians, and involve careful planning, especially if your household includes children and pets. Keep these points in mind when determining your claim for a tax deduction.
If your new home is at least 40 kilometres closer to a new job or business, you can deduct your eligible moving expenses from the income earned through your new employment or business.
If this income is less than your expenses, you may carry the extra expenses forward to a future tax year.
If you receive a moving allowance or relocation package from your new employer and declare it as income, you can only deduct eligible expenses that weren’t covered in the package, unless you declare the allowance as income.
The 40 km rule:
As mentioned above, if you’re moving at least 40 km to be closer to work or school, you can deduct moving expenses. Here’s how to do the calculation to confirm if your move qualifies:
Step 1: Calculate the distance from your old home t0 your work place/school. This is Distance “A” in kilometres.
Step 2: Calculate the distance from your new home to your work place/school. This is Distance “B” in kilometres.
Step 3: If Distance B minus Distance A is more than 40 kilometres you are eligible to deduct moving expenses.
Many people think the only eligible moving expense is the cost of movers, but many other costs can be deducted, including:
Transportation and storage costs: This applies to household items and even includes boats and trailers, and covers packing, hauling, movers, in-transit storage and insurance.
Travel expenses: You may deduct for yourself and your household members the costs for travel including vehicle expenses, food and accommodation.
Temporary living expenses: If you must stay in temporary housing near your old or new homes, you may deduct these costs as well as meals for up to 15 days.
Cost of cancelling the lease on your old home: This wouldn’t include any rental payments for the period during which you lived in the residence, or for any period before you cancelled your lease (regardless of whether or not you lived in the residence at the time).
Incidental costs related to your move which include:
changing your address on legal documents;
replacing driving licences and non-commercial vehicle permits (not including insurance); and
utility hook-ups and disconnections.
Cost to maintain your old home when vacant (maximum of $5,000) after you moved, and during a period when reasonable efforts were made to sell the home. It includes the following:
insurance premiums; and
cost of heating and utilities expenses.
When you claim moving expenses tax deductions, remember to keep receipts, invoices and supporting documents for all eligible expenses. Canada Revenue Agency will require them if you are audited. It’s always best to keep any receipts related to your expenses for seven years.
Important Tip: If you are moving to or from Canada, or between two locations outside of Canada, visit the Canada Revenue Agency website for further details on eligibility for these deductions.