Are Moving Expenses Tax Deductible?

Moving can be an exciting and challenging experience, and it often comes with a price tag. However, did you know that in certain circumstances, you may be able to deduct your moving expenses on your tax return? In this article, we will answer the question that many clients have - Are moving expenses tax deductible in Canada? We will go through the eligibility criteria, types of moving expenses that can be claimed, and how to properly claim them on your tax return.

Who Can Claim Moving Expenses?

To be eligible to claim moving expenses, you must meet certain criteria. First and foremost, you must have moved and established a new home to be employed or run a business at a new location. Whether you have moved within Canada, from outside of Canada to a new work location in Canada, or from Canada to a new work location outside of Canada, you may be eligible for the deduction. Additionally, you must be a deemed or factual resident of Canada.

It's important to note that the move must bring you at least 40 kilometers closer to your new place of work than your previous location. This ensures that the deduction is only available for moves that significantly reduce your commuting distance.

Full-time students in post-secondary programs may also qualify to deduct eligible moving expenses from part of their scholarships, fellowships, bursaries, and research grants that are required to be included in their income. However, the 40-kilometer rule would still apply.

Are Moving Expenses Tax Deductible?

Yes there are several types of eligible moving expenses that you can claim on your tax return. Let's take a closer look at each of them:

1. Transportation and Storage Costs

Transportation and storage costs are the most common moving expenses that can be deducted. This includes expenses related to hiring movers, in-transit storage, packing, and insurance. If you drove your own vehicle to the new location, you can also claim vehicle expenses such as gas, maintenance, and parking fees. Keep in mind that to claim vehicle or meal expenses, you must use either the detailed or simplified method accepted by Canada Revenue Agency (CRA).

2. Travel Expenses

When you move, you may incur travel expenses to reach your new location. These expenses include the cost of transportation, meals, and accommodations for you and your family members. Whether you choose to fly, take a train, or drive to your new home, these expenses can be claimed.

3. Temporary Living Expenses

If you need temporary accommodations for up to a maximum of 15 days while you are in the process of moving, you can deduct the cost of meals and accommodations for you and your family members. This can provide some relief during the transition period.

4. Lease Cancellation and Maintenance Costs

If you had to cancel the lease of your old residence due to the move, you can deduct the costs associated with the cancellation. Additionally, if your old residence remained vacant after you moved, you can claim the costs to maintain it, up to a maximum of $5,000. This includes interest, property taxes, insurance premiums, and utilities.

5. Incidental Costs

There are various incidental costs that can be deducted as long as they are related to the move. This includes changing your address on legal documents, replacing driver licenses, vehicle permits, and utility hookups and disconnections.

6. Selling Costs

If you bought or sold property as part of the move, you can deduct the associated selling costs. This includes expenses such as advertising, legal fees, real estate commission, and mortgage penalties, if applicable.

What Moving Expenses Are Not Tax Deductible?

In addition to the types of expenses that can be claimed, it is also important to understand what types of expenses are not tax deductible. Any moving expenses incurred for a move that does not meet the eligibility criteria outlined above will not be allowed as a deduction. This includes:

• Expenses incurred in preparing your old home for sale or your new home for occupancy;
• Losses resulting from the sale of your previous residence;
• Travel costs associated with trips to search for a house in the new location prior to relocation;
• Expenses to clean or repair a rental property in order to meet the landlord's requirements;
• The expense of mortgage default insurance;
• Costs incurred in replacing personal belongings that were not moved, such as curtains, carpets, and tool sheds;
• Expenses related to installing household items in a new residence;
• The additional cost of the new home compared to the previous one;
• Expenses associated with items that could not be taken along during relocation or were refused by movers;
• Costs of mail forwarding services.

How to Claim Moving Expenses on Your Tax Return?

Now that you understand the eligibility criteria and types of expenses that can be claimed, let's discuss how to properly claim moving expenses on your tax return.

To calculate the moving expenses you are eligible to claim, you will need to use form T1-M, Moving Expenses Deduction. On this form, you can deduct moving expenses only if you’ve earned employment or self-employment income at the new location. You cannot deduct any moving expenses from any other form of income, such as investment or employment insurance benefits, even if you received them while at your new location.

Please note that if you have received a reimbursement or allowance for your moving expenses, you can only claim these expenses:

• if you either include the amount received in your income or
• if you reduce your moving expenses by that same amount

In order to claim your moving expenses, it is necessary to enter your net eligible income on the moving expenses form. If you are an employee, this means taking the amounts reported on your T4 or T4A slips from your new work location and subtracting any deductions (such as RPP, union dues, employment expenses, CPP, clergy residence costs, or repaid income amounts.

If you are self-employed, deduct any union and professional dues as well as CPP/QPP contributions from the net self-employment income earned at the new work location when calculating net eligible income for tax purposes.

It's important to note that you do not need to attach the T1-M form or your receipts and documents to your tax return. However, you must keep these receipts and documents in case the CRA requests them for verification.

Carrying forward your moving expenses

If you are unable to claim all of your moving expenses in one year, you may be able to carry forward the remaining amount and claim it in a subsequent year. Be sure to keep records of all receipts and documents related to your move so that you can prove the eligibility of any claimed expenses.

Conclusion

Moving expenses can be a significant financial burden, but in certain situations, they may be tax-deductible. If you have recently moved and established a new home for employment or business purposes, you may be eligible to claim eligible moving expenses on your tax return. By carefully documenting your expenses and following the guidelines provided by the CRA, you can take advantage of this deduction and potentially reduce your tax liability.

Remember to consult with a tax professional or visit the CRA website for the most up-to-date information and requirements related to moving expense deductions. If you have additional questions on moving expenses and are looking for an accountant in Hamilton for professional guidance, contact us today. We are here to help!

If you want to learn more about other tax and accounting topics, explore the rest of our blog!

Disclaimer

The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting/tax professionals. NBG Chartered Professional Accountant Professional Corporation will not be held liable for any problems that arise from the usage of the information provided on this page.