Claim moving expenses

house sold, moving to another location
  • by admin
  • March 10, 2021

Did you move your business or place of employment? You may be eligible to claim moving expenses on your personal income tax return. Before you begin, you need to know the rules and the conditions that you need to satisfy in order get the tax benefit on your personal income tax return.

As an employee or a student, there are very few deductions that you can claim from taxable income reported on your Canadian income tax return. One of these deductions is your moving expenses.

Moving expenses

You are an individual who is self-employed, employed, or student can claim moving expenses on your tax return and deduct from your total income under section 62 of the income tax act of Canada for all your eligible relocations.

 

For eligible relocations, you need to meet the following conditions

You are Self-employed and employee:

You moved within Canada unless you were absent from Canada but considered as a resident of Canada for tax purposes.

Your old residence and the new residence where you moved are both in Canada unless you were absent from Canada but considered as a resident of Canada for tax purposes.

As a result of your move now your at least 40 kilometers closer to the new work location. The distance is measured by the shortest normal route available to the public.

You are a full-time student:

You moved as a full-time student in a university, college, or other educational institution for a post-secondary program.

Your old residence and the new residence where you moved are both in Canada unless you were absent from Canada but considered as a resident of Canada for tax purposes.

As a result of your move now your at least 40 kilometers closer to the educational institution. The distance is measured by the shortest normal route available to the public.

Note: Moving expenses deduction is available to you from employment or self-employment income. Your income may include co-op employment, summer employment, or running a business.

 

How do we measure the above 40 kilometers distance for the eligible moving expenses and qualify?

Your old house is at location A and you got a new job offer at location B. The distance between location A and location B is more than 40 kilometers. If you decided to move your house and your move becomes less than 40 kilometers from your new home to your new workplace, you are eligible to claim “moving expenses”.

 

 

Purpose of move

You moved for your employment or for carrying a business or attending an educational institution.

If you move solely for personal reasons that may not as an eligible relocation.

 

 

The eligible moving expenses that you can deduct:

Transportation and storage costs

You can deduct expenses related to your household items including your boats and trailers for packing, amounts paid to movers, transportation costs, in-transit storage costs, and insurance costs.

Travel expenses

You can claim your travel expenses when you move for your employment, self-employment, or as a student for yourself and move your household members. The expenses that you can claim are your air tickets, railway tickets, motor vehicle expenses, and meals and accommodations during the travel. You have the option to claim your travel expenses either under the detailed method or under the simplified method. Under the detailed method, you can claim all the travel expenses that you have paid and CRA may ask you to verify those receipts. Under the simplified method, you can claim a CRA prescribed rate per kilometer that you traveled and a flat CRA prescribed rate for meals per person. CRA may ask you to verify your traveling details.

Lease cancellation costs

You can deduct your lease cancellation fees paid for your old residence.

Costs of selling your old residence

You can deduct your expenses for advertising, notary or legal fees, real estate commissions, and any mortgage prepayment penalties. The moving expenses include the utilities, property taxes, and insurance paid during the period of selling the house.

However, any costs related to the repairs of any damages or improvements are not considered in the above moving costs.

Generally, when you sell your principal residence, it is tax-exempt. You deduct your selling costs from the proceeds of selling your principal residence.

Costs of new housing

If your or your spouse or jointly own your above old residence and you move to the new house you may also be eligible to claim moving expenses related to your new house which includes legal fees, taxes, fees, and duties on the transfer or registration of title to the new residence.

Moving expenses, certain important issues

Please hang on, you can only deduct your above moving expenses to the extent you have reported your income in the tax return in the tax year. However, if your eligible moving expenses exceed your income for that year, you may carry forward your excess moving expenses to the following year.

If you have received any allowances and reimbursements for your moving expenses, you have the options either to report the allowances and reimbursements as your income and deduct the full moving expenses, or do not report the allowances and reimbursements as your income and deduct the allowances and reimbursements from you full moving expenses and report only the net moving expenses on your tax return.

You report your moving expenses on a cash basis. That means you can deduct your moving expenses in the year in which you have paid and not in the year in which you moved.

You can not deduct the costs of moving your mobile old residence. However, you can deduct the costs of moving your personal stuff in the mobile home to the new residence.

The expenses that you can not claim as moving expenses

Expenses to repairs and improvements to make your old home more saleable

Loss on selling your old home

Travel expenses your incurred for house-hunting trips before you move

Travel expenses you incurred for job hunting in another city

Costs and value of items that you lost such as plants, frozen food, ammunition, paint, and cleaning products due to your move

Incurred expenses to clean or repair a rented home to meet the landlord’s standards

Expenses you incurred to replace personal-use items such as toolsheds, firewood, drapes, and carpets

Mail-forwarding costs (such as paid with Canada Post)

Costs of transformers or adaptors for household appliances

Selling costs of your old home related to and if you delayed selling for investment purposes or until the real estate market improved

Mortgage default insurance because you did not pay as prescribed

 

You may not be able to claim your moving expenses if:

Your new home is more than 40 kilometers away from your work location or your school

You are already paid/reimbursed for your reallocation costs in full

You do not have the required supporting documents

Disclaimer: Information in the blog/post/article has been presented for a broad and simple understanding. This is not legal advice. RKB Accounting & Tax Services does not accept any liability for its application in any real situations. You need to contact your accountant or us for further information.

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