Tax Deductions When Moving For Work Or School
By Mark Swartz
40 kilometers or more. It’s the minimum move eligible for relocation tax deductions. That’s if you change residences for work or full-time schooling.
Quite a few expenses may qualify as deductions in these cases. Like the cost of moving and storing household effects. Or the money you pay to cancel an existing lease.
Think about this when mulling over the question “should you relocate for work?” These financial implications might affect your decision.
When Moving Expenses Are Allowable
If you’re employed or self-employed, you can deduct eligible relocation expenses from the income you earn at your new work location, including amounts you receive under the Wage Earner Protection Program.
Moving expenses aren’t deductible from any other type of income, such as investments or employment insurance benefits. And you must subtract any employer-provided moving benefits you received after a relocation negotiation.
Normally for the move to qualify it must be within Canada. There are some exceptions, such as when absent from – but resident in – our country.
Students Can Qualify Too
You can claim eligible expenses when moving to be a student in full-time attendance of a post-secondary program. However, you can only deduct relocation costs from the parts of your scholarships, fellowships, bursaries, certain prizes, and research grants that are required to be included in your income.
Students may also claim deductions if they’ve moved to work, including summer and co-op employment, or to run a business.
Moving Expenses That Might Be Allowable
The range of items covered is potentially extensive. Here is a representation of what could be included:
- Transportation and storage costs: packing, hauling, movers, insurance and in-transit storage for household items, including boats and trailers.
- Travel costs: vehicle expenses, meals and accommodation, to move you and your household members to your new home.
- Temporary living expenses: costs for a maximum of 15 days for meals and temporary lodging near the old and the new home for you and your household members.
- Cost of cancelling your lease: applies to the lease of your old home, but not to rental payments for any period before the cancellation.
- Incidental costs: changing your address on legal documents, replacing driving licences and vehicle permits, utility hook-ups and disconnections.
- Cost of selling the old home: advertising, legal fees, real estate commission, and mortgage penalty if it’s paid off before maturity.
Some additional costs may qualify as deductions as well. A claim can be made for maintaining your old home when trying to sell it, and for some expenses when securing a new home.
Job Hunting Expenses Aren’t Covered
While the government shows generosity with moving costs, the same can’t be said for travel related to your work search. Nor do they cover losses you might incur on the sale of your house. Expenses associated with seeking a new place to live aren’t eligible either.
How To Submit Your Claims
To claim the eligible expenses, you have to complete form T1-M Moving Expenses Deduction. File it along with your personal tax return. Because of the tendency to over-deduct moving costs, keep all your related receipts for up to seven years after filing.
Normally you’d request these deductions in the year you paid the expenses. There is, though, a carry forward provision to the following year under certain circumstances.
Getting More Details
This article has been a brief overview. There are plenty of rules and complexities involved in any significant tax benefit.
Information and the T1-M form are available on the Canada Revenue Agency website (cra-arc.gc.ca). You could also call them directly and speak to one of their information officers.
You’d also be well-advised to consult with an accountant or other tax professional. Moving to another province or city can be exciting and unpredictable. One surprise you can do without is having your moving cost deductions rejected on a technicality.