Have you recently moved to a new location? Do you know that you can deduct certain moving expenses on your next tax return, including transportation, packing and storage costs?
Many people never realize these tax benefits because they don't know what can be deducted. If you are preparing to move, it's best to be informed beforehand so you know which receipts to keep. You may find it worthwhile during a move to pay for various services that are tax-deductible rather than doing them yourself. A typical move involves a number of costs including hiring a company to transport personal effects and furniture, hotel stays and meals (if the move involves driving a long distance to a new home), and service fees to disconnect and reconnect utilities. In addition, renters who leave on short notice may have to pay the cost of breaking a lease.
Homeowners will incur closing costs and commissions on the sale of their home as well as legal and other fees on the purchase of their new home. This article provides information regarding tax-deductible moving expenses.
To claim moving expenses on your taxes, your move has to meet the following conditions:
- You moved to your new home or new apartment to start a job or a business, or to attend full-time post-secondary courses at a university, college or other educational institution
- Your new place of residence is at least 40 km closer to your workplace or school than your previous home.
- You moved from one place in Canada to another place in Canada.
Two groups are eligible to deduct a portion of their moving expenses: students moving away from home to attend school and people moving to a new area for a job or relocation by their employer. There has been a challenge to the rules regarding eligibility for the self-employed as you'll read later in this article.
Students must fulfill two main qualifications: the distance between your home and school must be at least 40 km (by the shortest public route) and you must be a full-time student. A full-time student is defined as someone who regularly attends a college, university, or another educational institution in a program at a post-secondary school level (whether in Canada or not) and is taking at least 60% of the usual course load during each semester.
As a student, you can only deduct eligible moving expenses from award income (scholarships, fellowships, bursaries, prizes, and research grants) that you report on your return. Your moving expenses must be greater than your award in order to deduct any moving expenses. As Revenue Canada's website reads, "If your moving expenses are more than the award income you report for the year, you can deduct the unused portion of those expenses from the award."
Although many students will not earn award income and will therefore not be able to deduct moving expenses, tuition fees themselves are a tax deduction. If a student has a part-time job, tuition can reduce taxes paid on those earnings. Students who meet the qualifications and have received award income can deduct the costs of travel, shipping, and transportation of belongings, as well as items listed below under 'Expenses you can deduct'.
If you are moving for work (e.g. a company relocation or new job), are employed and establish a home at least 40 km closer to a new job than your old home, then you qualify to deduct moving expenses. Similarly, if you are self-employed, and you establish a home at least 40 km closer to your new operational business than your old home, you also qualify to deduct moving expenses.
According to Revenue Canada, you must establish your new home as the place where you and members of your household ordinarily reside. For example, you have established a new home if you have sold or rented (or advertised for sale or rent) your old home.
Employed and Working from Home: an Exception to the Rule
Until recently, employees who work from home and move have faced some restrictions regarding moving expenses. In the court decision Gary Adamson v. the Queen, Mr. Adamson had incurred moving expenses as an employee who was required to provide his own office in his home.
Expenses you can Deduct:
- transportation and storage costs (such as packing, hauling, in-transit storage, and insurance) for household effects, including items such as boats and trailers;
- travelling expenses, including vehicle expenses, meals, and accommodation, to move you and members of your household to your new residence (you can choose to claim vehicle and meal expenses using the simplified method);
- costs for up to 15 days for meals and temporary accommodation near either residence for you and the members of your household (you can choose to claim meal expenses using the simplified method); and
- the cost of cancelling a lease for your old residence, except for any rental payment for the period during which you occupied the residence.
When your old residence is sold as a result of your move, eligible moving expenses also include:
- legal or notaries fees for the purchase of the new residence, as well as any taxes paid (other than GST/HST or property taxes) for the transfer or registration of title to the new residence, if you or your spouse or common-law partner sold the old residence, and
- the cost of selling your old residence, including advertising, notarial or legal fees, real estate commission, and mortgage penalty when the mortgage is paid off before maturity.
Expenses that are not Deductible:
- expenses for work done to make your home more saleable;
- any loss from the sale of your home;
- expenses for house-hunting trips before you move;
- the value of items movers refused to take, such as plants, frozen food, ammunition, paint, and cleaning products;
- expenses for job hunting in another city (such as travelling expenses);
- expenses to clean or repair a rented residence to meet the landlord's standards;
- expenses to replace personal-use items such as tool sheds, firewood, drapes, and carpets;
- mail-forwarding costs (such as with Canada Post);
- costs of transformers or adaptors for household appliances; and
- costs incurred in the sale of your old home if you delayed selling for investment purposes or until the real estate market improved.
Remember to keep receipts and documents supporting your claims, you do not have to include these documents in your tax claim but Canada Revenue Agency may want to see them at a later date.
Keep in mind that this article is for information only. The tax laws are frequently modified. We recommend that you visit the Canada Revenue Agency's website for specific details about which moving expenses you can claim or consult a professional accountant to maximize your tax return.