Understanding Moving Expenses Tax Deductible in Canada

What are Moving Expenses?

Moving expenses are costs incurred during the process of relocating from one place to another. These costs can include transportation, packing, temporary lodging, and other related expenses. In Canada, certain moving expenses can be claimed as deductions on your tax return, provided you meet specific criteria set by the Canada Revenue Agency (CRA).

Criteria for Claiming Moving Expenses

To qualify for moving expenses tax deductible in Canada, you must satisfy the following conditions:

1. Change in Work Location or Post-Secondary Education: You must have moved to start a new job, run a business at a new location, or attend a post-secondary institution.
2. Minimum Distance Requirement: Your new home must be at least 40 kilometers closer to your new place of work or school than your old home.
3. Timing of the Move: The move should have occurred within the same year or be closely related to the start date of your new job or school term.

Types of Tax Deductible Moving Expenses

The CRA allows various types of moving expenses to be deducted, provided they meet the eligibility criteria. These include:

1. Transportation and Storage Costs

• Transportation: This includes the cost of hiring a moving company or renting a moving vehicle.
• Storage: Costs for storing your household items at a facility until you can move them to your new home.
• Insurance: Insurance costs for your belongings during the move.

2. Travel Expenses

• Vehicle Expenses: Gas, oil, and vehicle maintenance during the move.
• Meals and Lodging: If you need to stay in temporary accommodations or dine out during your move.

3. Temporary Living Expenses

• Temporary Housing: Costs for temporary accommodation at your new location for a maximum of 15 days.

4. Cost of Canceling a Lease

• Lease Cancellation: Costs associated with breaking a lease at your old residence.

5. Incidental Costs

• Utility Connections: Fees for disconnecting and reconnecting utilities.
• Legal Fees and Real Estate Commissions: Fees related to selling your old home and purchasing a new one.
• Title Transfer Fees: Costs associated with transferring the title of your new property.

6. Costs Related to Selling Your Old Home

• Real Estate Commission: Fees paid to a real estate agent for selling your old home.
• Advertising: Costs for advertising the sale of your old home.
• Legal Fees: Legal fees associated with the sale of your old home.
• Mortgage Penalty: Penalty for paying off your mortgage early due to the move.

7. Costs Related to Buying Your New Home

• Legal Fees: Legal fees associated with the purchase of your new home.
• Title Transfer Fees: Fees for transferring the title to your new home.
• Property Purchase Taxes: Taxes paid on the purchase of your new home.

Limitations and Exclusions

While many moving expenses are deductible, some are specifically excluded by the CRA:

1. Home Renovation Costs: Expenses for improving your old home to sell it or your new home to move in are not deductible.
2. Losses on the Sale of Your Home: Any financial loss incurred from selling your home for less than its purchase price.
3. Expenses Paid by Your Employer: If your employer reimburses you for moving expenses, you cannot claim these expenses as deductions.
4. Expenses for Moves Not Related to Work or Education: Moves that are not directly related to starting a new job, business, or post-secondary education do not qualify.

How to Claim Moving Expenses

Step-by-Step Process

1. Gather Documentation: Collect all receipts and records of your moving expenses. Ensure they clearly show the amount paid, the date, and the reason for the expense.
2. Complete Form T1-M: Fill out the T1-M Moving Expenses Deduction form. This form requires details of your move, including dates, distances, and expenses incurred.
3. Report on Your Tax Return: Enter the total amount of eligible moving expenses on line 21900 of your income tax return.
4. Attach Form T1-M: Attach the completed T1-M form to your tax return. If you are filing electronically, keep the form and receipts in case the CRA requests them later.
5. Deduct Expenses: Only deduct expenses that have not been reimbursed by your employer. If your employer provided a reimbursement that is included in your income, you may be able to claim the full amount of your expenses.
6. Carry Forward Unused Amounts: If your eligible moving expenses exceed your net income at the new location, you can carry forward the unused amount and deduct it in the following year.

Tips for Successful Claims

• Accurate Record-Keeping: Maintain detailed records and receipts for all moving-related expenses.
• Meet Deadlines: Ensure your move and the start of your job or school are within the same tax year.
• Professional Assistance: Consider consulting a tax professional to ensure you are claiming all eligible expenses correctly.

Frequently Asked Questions (FAQs)

Can I Deduct Moving Expenses If I Move for a Summer Job?

Yes, if the job is at least 40 kilometers closer to your new home and you meet the other eligibility criteria, you can claim moving expenses even for temporary or seasonal employment.

Can I Claim Moving Expenses If I Move Back to My Original Home?

No, moving expenses are only deductible for moves that bring you closer to a new place of work or education, not for returning to a previous location.

What If My Employer Covers My Moving Expenses?

If your employer reimburses you for moving expenses, you cannot claim these expenses as deductions. However, if the reimbursement is included in your taxable income, you may still be able to deduct the expenses.

Are Moving Expenses Deductible for International Moves?

Moving expenses are only deductible if the move is within Canada or from outside Canada to a new work location in Canada. Moves from Canada to another country are not eligible for deductions.

How Does the CRA Verify My Moving Expenses?

The CRA may request to see your receipts and records to verify your claims. It’s essential to keep detailed and accurate documentation of all your moving expenses.

Conclusion

Understanding moving expenses tax deductible in Canada can provide significant financial relief during a relocation. By knowing which expenses are eligible, meeting the necessary criteria, and following the correct procedures for claiming these expenses, you can reduce your tax burden and make your move more affordable. Always keep detailed records and consider consulting a tax professional to maximize your deductions and ensure compliance with CRA regulations. Moving can be a stressful experience, but with the right knowledge and preparation, you can take advantage of the available tax benefits and make the transition smoother.