Are Moving Expenses Tax-Deductible in Canada?

If you’ve recently moved for work, to start a business, or to attend full-time post-secondary education, you might be wondering if your moving expenses are tax-deductible. The good news is that in Canada, the Canada Revenue Agency (CRA) allows eligible individuals to claim moving expenses as a deduction, helping to ease the financial burden of relocation.

In this comprehensive guide, we’ll explore the eligibility criteria for claiming moving expenses, what expenses qualify, how to claim them, and provide examples to make the process clear and actionable. Whether you’re relocating across the province or the country, understanding this tax deduction can save you money and reduce your tax liability.

What Are Moving Expenses?

Moving expenses refer to the costs incurred when relocating to a new residence for specific purposes, such as starting a new job, operating a business, or attending a full-time post-secondary educational institution. These expenses can include transportation, storage, travel, and even costs associated with selling your old home or buying a new one.

The CRA recognizes that moving can be costly and provides tax relief by allowing taxpayers to deduct eligible moving expenses from their income, provided they meet specific criteria.

Eligibility for Claiming Moving Expenses

To qualify for this deduction, you must meet the following conditions:

1. Purpose of the Move

Your move must be related to:

• Employment: Starting a new job or transferring to a new location for your existing job.
• Business: Relocating to run or operate a business.
• Education: Attending full-time post-secondary education at a college, university, or other educational institution.

2. Distance Requirement

Your new home must be at least 40 kilometers closer (by the shortest public route) to your work or school compared to your old home. This distance is measured in a straight line and is a key criterion for eligibility.

Example:

• If your old home is 60 kilometers from your new workplace and your new home is 15 kilometers away, you meet the 40-kilometer rule.

3. Taxable Income Requirement

You can only deduct moving expenses against income earned at your new work location or from scholarships, bursaries, fellowships, or research grants received while attending full-time post-secondary education. If your income in the new location is less than your moving expenses, you can carry forward the unused portion to the next tax year.

What Moving Expenses Are Tax-Deductible?

The CRA provides a comprehensive list of eligible moving expenses. Here’s a breakdown:

1. Transportation and Storage

This includes the cost of:

• Moving your household items to the new residence.
• Packing, shipping, and storing your belongings.

Example:

• If you hire a moving company and pay $2,500 for packing, transportation, and unloading, this amount is deductible.

2. Travel Expenses

You can claim the cost of traveling from your old residence to your new one, including:

• Gasoline or mileage for driving.
• Public transportation, such as train or bus tickets.
• Meals and lodging during the trip.

Example:

• You drive 800 kilometers to your new home and spend $300 on gas, $200 on meals, and $150 on lodging. These expenses are deductible.

3. Temporary Lodging

If you require temporary accommodation while moving, you can deduct these costs for up to 15 days.

Example:

• You stay in a hotel for 10 days at $120 per night. This $1,200 expense qualifies as a deduction.

4. Cost of Selling Your Old Home

If you owned your previous residence, eligible expenses include:

• Real estate commission fees.
• Advertising costs.
• Legal and notary fees related to the sale.

Example:

• You sell your home and pay $15,000 in real estate commissions. This amount is deductible.

5. Cost of Buying a New Home

If you purchased a new residence, eligible expenses include:

• Legal fees.
• Title transfer fees.
• Mortgage penalties for early repayment (if applicable).

Example:

• You incur $2,000 in legal fees when buying your new home. This cost is deductible.

6. Lease Cancellation Costs

If you terminate the lease on your old residence, any penalties or fees associated with the cancellation are deductible.

Example:

• You pay $1,000 to break your apartment lease. This amount qualifies as a deduction.

How to Claim Moving Expenses

Claiming moving expenses on your tax return involves several steps:

Step 1: Gather Documentation

Keep all receipts, invoices, and records of your moving expenses. The CRA may request proof during a review or audit.

Step 2: Complete Form T1-M

Fill out the T1-M Moving Expenses Deduction form, which calculates the total amount of eligible moving expenses.

Step 3: Report on Your Tax Return

Transfer the amount from the T1-M form to line 21900 of your tax return. Ensure the claimed expenses align with your earned income in the new location.

Step 4: Carry Forward Unused Expenses

If your moving expenses exceed your income, carry forward the unused portion to claim in future tax years.

Examples of Moving Expense Scenarios

Scenario 1: Moving for a New Job

John accepts a job offer in another city, requiring him to relocate 150 kilometers from his current home. He spends:

• $3,000 on moving services.
• $500 on gas and meals during the move.
• $1,500 on temporary lodging.

John’s total deductible moving expenses are $5,000, which he claims against his income from the new job.

Scenario 2: Moving for Post-Secondary Education

Emily moves 50 kilometers closer to attend university full-time. She spends:

• $1,000 on transportation and storage.
• $300 on travel expenses.
• $800 on legal fees for selling her old home.

Emily claims these expenses against her taxable scholarships and bursaries, reducing her overall taxable income.

Key Points to Remember

1. Eligibility Is Key: Ensure you meet the 40-kilometer rule and are moving for work, business, or education.
2. Keep Detailed Records: Maintain all receipts and documents to support your claim.
3. Know What’s Deductible: Only specific expenses qualify, so review the CRA’s guidelines carefully.
4. Consult a Tax Professional: If your situation is complex, seek professional advice to maximize your deductions.

Conclusion

Moving can be a stressful and expensive process, but understanding the tax deductions available can help ease the financial burden. Whether you’re relocating for work, business, or education, knowing the eligibility criteria, tracking your expenses, and properly filing your claim can lead to significant savings on your tax return.

If you’re looking for expert assistance with claiming moving expenses or need help navigating Canada’s tax system, contact BOMCAS Canada today at info@bomcas.ca or visit BOMCAS Canada for professional tax services tailored to your needs. Let us help you make the most of your tax savings!