MOVING EXPENSES
Moving expenses are costs incurred by employees or individuals when relocating for work or education. Under specific circumstances, these expenses may be deductible, provided they meet the criteria set by the Canada Revenue Agency (CRA). Below is a comprehensive guide to understanding eligible moving expenses, tax implications, and employer reimbursements.
Eligibility Criteria for Moving Expenses
- Distance Requirement: The new residence must be at least 40 kilometers closer to the new workplace or educational institution compared to the old residence.
- Purpose of Move: The move must be related to starting a new job, operating a business, or attending a full-time post-secondary educational institution.
- Timing of Move: The expenses must be incurred within the tax year during which the relocation occurs.
Eligible Moving Expenses
The following moving expenses are deductible if they meet CRA guidelines:
- Transportation and Storage Costs: Includes packing, moving, hauling, and storage of household goods and personal items.
- Travel Costs: Expenses for you and your household members during the move, such as:
- Vehicle expenses (gas, maintenance, and mileage).
- Meals and accommodations during travel.
- Temporary Living Expenses: Costs for up to 15 days of temporary lodging and meals near the old or new residence.
- Lease Cancellation Fees: Charges for breaking the lease agreement at your old residence.
- Incidental Costs: Includes utility disconnection and reconnection fees.
- Costs Associated with Selling Your Old Residence: Real estate commissions, advertising costs, legal fees, and mortgage penalties.
- Costs Associated with Purchasing a New Residence: Legal fees, title transfer taxes, and other related costs (excluding property taxes or GST/HST).
Non-Eligible Moving Expenses
- Expenses for house-hunting trips prior to the move.
- Job search expenses in the new location.
- Costs related to renovating or repairing your old residence to prepare it for sale.
- Losses incurred from the sale of your old home.
- Expenses reimbursed by your employer that are not included in your taxable income.
Employer Reimbursements and Allowances
If your employer reimburses or provides an allowance for your moving expenses, these amounts may be non-taxable if they adhere to CRA guidelines. However, any amounts exceeding reasonable limits or covering personal expenses must be included as taxable income.
The CRA defines a "non-accountable allowance" as a lump sum provided by the employer for moving expenses without requiring detailed receipts. This allowance is typically taxable unless the amounts are reasonable and used strictly for eligible moving expenses.
Special Rules for Housing Loss Reimbursement
The CRA recognizes an "eligible housing loss" as the financial loss incurred when selling your old residence due to relocation. Employers may reimburse employees for this loss under the following conditions:
- The relocation qualifies as an "eligible relocation" (e.g., the distance requirement is met).
- Only one residence may be designated as eligible for such reimbursement.
- Reimbursements exceeding $15,000 are considered a taxable benefit.
How to Claim Moving Expenses
- Form T1-M: Complete the CRA’s "Moving Expenses Deduction" form to calculate eligible claims.
- Documentation: Retain all receipts, agreements, and proof of payments for eligible expenses.
- Limitations: The deduction is capped at the income earned in the new location. Unused amounts may be carried forward to future tax years.
Additional Resources
