While most people are aware they can claim moving expenses on their tax return, there are a few rules to follow and tricks to maximize the deductions.
The idea is fairly simple – the government provides a tax break to those who have moved for work by allowing them to deduct the moving expenses from the income earned at their new job.
Related: How to Fix Tax Return Errors
Moving expenses are one of the most lucrative aspects of a tax return because they allow the taxpayer to deduct their moving expenses directly off their earned income, which is better than a non-refundable tax credit.
To claim moving expenses you must have moved at least 40km closer to your new work location – measured by the shortest normal route that anyone can take.
The move must generally be within Canada and students can claim moving expenses to attend school full-time outside of Canada.
If you’re moving to Canada from another country you may be able to claim moving expenses so long as you are a resident of Canada (deemed or factual) or a full-time student.
Eligible Types of Income
Not all types of income are eligible for moving expenses.
In order to deduct moving expenses, the income at your new place must be actively earned. In other words retirees who move across the country won’t be able to deduct their moving expenses unless they work (either as an employee or self-employed).
Salary, wages and self-employment income are all examples of actively earned income that does qualify for the moving expenses deduction.
Pension, investment, EI benefits or capital gains are all examples of income that do not qualify for moving expenses deduction.
Eligible Moving Expenses
The following are examples of eligible moving expenses:
- Real estate commissions from selling your old home
- Mortgage penalties for breaking a mortgage on your old home
- Legal fees on both the sale of the old home and purchase of the new one
- Meals/lodging expenses while travelling to the new home
- Costs of maintaining your old home while it is listed on the market to be sold
- Change of address costs (new drivers license, new utility connection costs)
- Storage and removal costs of personal items
Basically, all reasonable costs incurred while moving are eligible but you’ll want to make sure to double check with CRA when in doubt.
Ineligible Moving Expenses
The following are examples of ineligible moving expenses:
- Loss on the sale of the old home
- Costs that were incurred before the move (ie. house hunting)
- Costs of cleaning a rental residence
- Any expenses that were reimbursed by an employer
- Costs to forward mail to the new home
Rules for Students
Students can claim moving expenses against any summer earnings or grants/scholarships received that would otherwise be taxable. The students must be attending full-time at a post-secondary school (minimum 60% course load).
The Simplified Method
If you have moved and haven’t been able to keep track of all your receipts (or just don’t want to), there is an easier way called the simplified method.
This method calculates travel expenses using a rate per kilometer (instead of using the actual amount of the expenses). To use this method you’ll need the total distance travelled.
This method allows you to claim a flat rate of $17 per meal (up to $51 per person, per day) for meals and a certain rate per kilometer for vehicle costs. The actual rate is based on the province where the move started, and is set each year by CRA. Click here for more information.
The nice thing about the simplified method is that CRA doesn’t require you to submit receipts for your moving costs incurred. If you didn’t keep receipts for all your expenses you’ll still be able to claim the moving expenses using the simplified method.
For more detailed information click here for a full summary from CRA.