Have you moved to take a new job, start a new business or attend post-secondary school? If so, your moving expenses might be deductible for tax purposes. To be eligible, your new home must be 40kms closer to your new job, business or school from your last home.
The move is generally considered to be a permanent move; i.e. a spouse working out of province for a few months at a time while the other spouse and children stay in their current location would not likely be considered moving.
Once you have determined the 40km rule has been met, you want to keep track of your moving expenses including receipts for:
- Transportation and Storage Costs includes expenses like packing, hauling, movers, in-transit storage, insurance, etc.
- Travel Expenses. There are two methods to calculate vehicle, meals and accommodation expenses.
- Detailed method requires to you to keep all receipts to claim the actual expenses. This might include gas and meals. You will want to keep receipts for hotels and flights if used for moving.
- Simplified method uses a prescribed rate by CRA for meals and kms driven by car. Sometimes this is easier to use when receipts are forgotten about or lost during the move.
- Temporary Living Expenses includes meals and temporary accommodation during the moving process, while waiting for closing or move in dates. The temporary expenses may be near the old or new home, for you and your family, and is restricted to a maximum of 15 days combined.
- Cost of Cancelling Your Lease at your old residence can be claimed. Cost of rent is not generally deductible however sometimes this is the cost of cancelling the lease.
- Incidental Costs related to the move might include:
- Changing address on legal documents
- Replacing driver’s license and non-commercial vehicle permits (not including insurance)
- Utility hook-ups and disconnection fees
- Cost to Maintain the Old Home when Vacant is deductible if it is waiting to be sold, provided you are not delaying the sale for investment purposes or waiting for the market to improve. It must also not be occupied by you, your family or rented. A maximum of $5,000 can be deducted on items including interest, property taxes, insurance premiums, heating and utility expenses paid to maintain the old residence while it was vacant after you moved, and during a period when reasonable efforts were made to sell the home.
- Cost of Selling the Old Residence includes advertising, notary or legal fees, real estate commission, and mortgage penalty.
- Cost of Purchasing the New Residence includes notary or legal fees and any taxes paid for the transfer or registration of title. GST/HST and property taxes are NOT
To claim the moving expenses, you must have income from the new work location or business. If your moving expenses are more than your income from the new location, the remaining expenses can be carried over. As a full-time post-secondary student, your income may be in the form of scholarships, fellowships, bursaries, certain prizes, and research grants.
For example, your total moving expenses were $15,000 for 2015. You started a new job in December and earned $5,000. The total moving expenses you can claim in the year 2015 is $5,000 but the remaining $10,000 can be claimed in the year following provided you have income from the job or business.
Often times, the move can span over 2 years so when claiming the expenses make sure you are claiming only the expenses in the year they were paid. The expenses paid in the following year are still deductible but can only be claimed when paid and provided there was income from the new workplace or business.
Keep in mind that if your new employer paid for your moving expenses or a portion of, you can only claim the difference that was not covered. If your employer included the moving allowance in your income and on your T4, you should be able to claim the full amount.
Common expenses that are NOT deductible as moving expenses include:
- Expenses for work done to make your old residence more saleable
- Any loss from the sale of your home
- Travel expenses for house-hunting trips before your move
- Travel expenses for job hunting in another city
- The value of items movers refused to take, such as plants, frozen food, ammunition, paint, and cleaning products
- Expenses to clean or repair a rental residence to meet the landlords’ standards
- Expenses to replace personal use items such as toolsheds, firewood, drapes, and carpets
- Mail-forwarding costs; i.e. Canada Post
- Costs of transformers or adaptors for household appliances
- Mortgage default insurance
Moving expenses are often reviewed by CRA so make sure you keep track of your expenses or if using the simplified method, make sure the number of days and/or kms are reasonable.
As always, if you need help or guidance, speak with a Chartered Professional Accountant. We are always here to help you!
***This blog is for information only and not to be used as tax advice or planning without first seeking professional advice. Information is subject to change without notice.