The moving expenses deduction is a great way to reduce your taxable income – and hopefully receive a tax refund. However, there are restrictions about who can claim moving expenses.
Who can claim moving expenses?
You can deduct moving costs if you move to work or run a business in a new location. Your new home must be at least 40 kilometres closer to your new job or business. In other words, if you are changing jobs and decide to move across town to be near the new office, you could not claim relocation expenses.
In addition, full-time students in post-secondary programs (colleges, universities or other higher education institution) can claim moving expenses. Once again, the 40-kilometre rule applies.
What moving expenses are tax deductible?
Good news! The Canada Revenue Agency allows you to include a wide range of costs under the “moving expense” deduction on your tax return. The allowable moving expenses are:
- Transportation and storage of your household belongings. You can either rent a truck yourself or hire a moving company.
- Moving expenses flights. If your move involves flying to another part of the country, you can claim your tickets. Or if you are driving to your new home, you can calculate your deduction based on the number of kilometres travelled.
- Temporary living expenses. If you need to get a hotel or Air BnB because your new home is not yet available, you can claim up to 15 days of expenses
- The cost of cancelling the lease on your old home. If you have to pay rent because your lease goes past your moving date, you can include this amount in your expenses.
- The cost of replacing your driver’s license, disconnecting utilities at your old home and connecting services at your new one.
- The cost to maintain your old home while you are trying to sell it. You can claim up to $5,000 for mortgage interest, property tax, insurance and heating. However, you can’t expense this if you are renting your home.
- The cost of selling your old home, including real estate fees, legal fees and any penalties from cancelling your mortgage before its maturity date.
What part of moving expenses are tax deductible?
So, what percentage of moving expenses can you claim? 100 percent, subject to the limits mentioned in this article. However, you must deduct any reimbursement your employer provided. For example, suppose your relocation expenses totaled $10,000 and your employer provided a moving allowance of $6,000. You can only claim the difference, $4,000, as a moving expense deduction on your tax return.
You cannot claim the following as moving expenses:
- The cost of renovations to your home before you put it up for sale
- Any loss that you may take on the sale of your home
- Travel expenses to look for a job or for house-hunting
How do you claim expenses on your tax return?
To claim moving expenses, you must fill out the Form T1-M. This form asks you to confirm that you are moving at least 40 kilometres closer to work or school. Then it provides space to list all of your moving expenses.
You don’t need to submit your receipts with your tax return. However, be sure to keep them on hand. And keep a record of the dates that were relevant to your move and selling your old house.
CRA moving expenses for the self employed
The self-employed are entitled to claim relocation expenses if they moved their business location.
Both the self-employed and employees can only claim moving expenses up to the net business income earned at the new location. For example, Jane had moving expenses of $10,000 when she decided to move her consulting company from Toronto to a smaller town. She moved in December and only earned $5,000 in net income that month.
In this case, she could claim up to $5,000 in moving expenses this year, which is the amount that she earned. She could carry forward $5,000 for the moving deduction to the following year.
Can seniors claim moving expenses?
Anyone can claim this deduction as long as they are moving for work or full-time study and they meet the 40-kilometre rule. Unfortunately, retired seniors who are moving due to downsizing or other reasons cannot make a claim.
CRA moving expenses simplified method
There are two ways of calculating relocation expenses such as meals while traveling or while you are waiting for your new home to be available – simplified and detailed.
With the detailed method, you keep receipts for each meal purchased. With the simplified method, you can claim a flat rate per person per day.
CRA moving expenses audit
As you can see, moving expenses can add up to thousands of dollars when you include hiring movers, legal fees and the cost of selling your old house. With people claiming such large deductions, they naturally catch the eye of CRA auditors.
Don’t worry! As long as you have followed the rules and have all of your receipts, the CRA audit should be straightforward. They will ask for a copy of your receipts and confirmation from your school/employer that you have in fact moved. The CRA auditors may have some questions but the audit should be completed quickly if you have all the documents in order.
Is it worth claiming moving expenses?
Can you write off moving expenses? Absolutely. The moving expenses deduction can be valuable in reducing your taxable income. You are eligible if you move to take a new job, to study full-time at a post-secondary institution, or are self-employed. You qualify if you move at least 40 kilometres closer to your place of work or school. Be sure to keep all your receipts and a record of all of the activities related to the move. Check out the CRA moving expense form for details.
