Were you aware that certain expenses related to relocating to a new job in Canada are eligible for tax deduction? Moving to a new place can be stressful and costly, but if you’re starting a new job, you may be able to deduct some of your expenses. Let’s explore what expenses are eligible for deduction.

Tax Deductions for Moving Expenses: A Guide

Did you know that as a Canadian resident, you may be eligible for tax deductions on your moving expenses if you are required to change your residence due to a new job or a change in employment location? However, there are certain conditions that must be met. According to the Income Tax Act, you must move at least 40 kilometers closer to your new employment or business location to be eligible for these tax deductions. This could involve moving to a new province, or simply relocating within the same province as long as your new location is at least 40 kilometers closer to your new job than your old one.

For instance, let’s say your company is opening a new office in Kitchener, and you currently reside in Toronto. As Kitchener is around 80-90 kilometers away from Toronto, moving to the Waterloo Region would make sense, and you would be able to take advantage of the tax deductions we’ll be discussing here, as they apply to you, even though both locations are in Ontario and are considered relatively close to each other.

Whether you’re a homeowner or a tenant, you can claim the moving expenses tax deduction if you meet the requirements. One common mistake people make is assuming that only relocating homeowners are eligible for tax breaks if they make an employment-related move. However, it’s the act of moving and its associated costs that we’re discussing here, not the home you’re moving to.

What Moving Expenses can be Deducted on Your Taxes When Relocating for Work?

If you are relocating for work, the following expenses may be eligible for tax deductions:

• Transportation costs, such as airfare, train or bus tickets, vehicle rentals, and personal vehicle expenses. This includes the cost of gas and any repairs incurred during the move.
• Moving company fees or the cost of a self-move, including renting a truck or storage container.
• Storage costs for your household items.
• Meals and lodging expenses for up to 15 days near your old or new residence.
• Lease cancellation fees for your previous rental home.
• Costs associated with selling your old residence, including real estate agent fees.
• Legal fees, transfer taxes, and registration fees for the new residence, except for HST and other non-deductible sales taxes.
• Mortgage interest, property taxes, insurance, heating, and utilities for your previous home, up to a maximum of $5,000. During this time, the property cannot be rented or occupied by you or your family members, and you must make reasonable efforts to sell the property.
• Updating legal documents, replacing driver’s licenses, and connecting or disconnecting utilities for your new residence.

It’s important to note that if your employer reimburses you for any of these expenses, you cannot claim them as deductions on your taxes.

Also read: Essential Information on Payment Dates and Benefits

Tax Tips for Employees Relocating for Work

Navigating the ins and outs of tax-deductible moving expenses can be a bit tricky. To help you out, here are some helpful tips to keep in mind:

Tax Tip #1:

When it comes to personal vehicle and dining costs, you don’t need to provide receipts to qualify for deductions. Instead, the cost per kilometer is determined by the region or territory you start your journey from. For example, if you live in Ontario and drive your own car to your new location, you can deduct 57 cents per kilometer. You can also deduct up to $51 per day for each household member for meals consumed during the move, up to a maximum of 15 days. Keep in mind that the standardized meal and travel expense amounts are adjusted annually by the CRA.

Tax Tip #2:

Each move is considered separately, even if it occurred in the same tax year as the first move. This means that a second move back to your previous location and employer would also qualify for moving expenditure tax deductions.

Tax Tip #3:

If you’re selling your home to move to a new job, deduct the selling costs as moving expenses instead of adding them to the home’s cost for capital gains reasons. This will result in a better deduction on your income tax return.

Tax Tip #4:

The list of qualifying expenses is not exhaustive. If you believe you have additional bills and expenses that may qualify as moving expenses, consult with your accountant.

Tax Tip #5:

The Canada Revenue Agency does not allow for the reimbursement of some expenses. These include the costs of renovations to make your previous home more marketable, losses from the sale of your previous residence, costs of job hunting and house hunting, the cost of mail forwarding, and mortgage default insurance.