Are Moving Expenses Tax Deductible? Saving Money When You Move
Moving can be a stressful experience, but if you're moving for a job, it might come with a financial perk—you may qualify to have your moving expenses count toward tax deductions. Let's dive into when you can qualify, which moving expenses you can deduct, and which you can't.
When Can You Deduct Moving Expenses?
Not every move will qualify for tax deductions. You may claim tax deductions for moving expenses if, and only if:
- You are either 1) moving for business reasons, such as a job transfer to a new location, a new job, or self-employment, or 2) moving to be a full-time student in post-secondary education
- Your new residence is at least 40 kilometres closer to your new place of work
- Your place of work isn't already paying the moving expenses for you
- Both the old and new residences are in Canada (unless you're moving for post-secondary education, in which case it's "either or both," or if you're an absent resident)
Luckily, this applies whether or not you're a homeowner. Both homeowners and renters may take advantage of these deductions. This can even apply for students moving back in with their parents to get a summer job, so long as the move meets the distance requirement.
However, it's crucial that the new place of work is, in fact, a new location. The CRA may deny a moving expense claim if your work location before and after the move isn't geographically different. In addition, moving to a new home within the same city—for example, moving to a larger home—will likely not qualify as an eligible move.
Rules for Deducting Moving Expenses
Taxpayers who meet the requirements may deduct reasonable moving expenses for themselves, their household, and personal property. The taxpayer and their household don't have to be travelling together or even at the same time for the moving expenses to qualify.
The expenses must be deducted from employment or self-employment income from working at the new location rather than other types of income, such as investment income or benefits. If the work income earned during the remainder of the year after the move does not exceed the amount deducted, don't worry; you won't miss out on your tax benefits. The remainder of the deduction can be carried over into future years.
The best summary of the calculation rules of moving deductions can be found on the T1-M form on the CRA website, which is used to claim the expenses.
What Moving Expenses Can Be Deducted?
There are a number of moving expenses that are explicitly provided for in Section 62 of the Income Tax Act. Though there isn't a specific dollar limit, your claim being granted is still dependent on being "reasonable." These specifically mentioned expenses include:
- Travelling expenses, including items such as gasoline, meals, and accommodations, to move you and your household to the new location
- Transport and storage expenses, such as packing materials, hauling, movers, in-transit storage, and moving insurance, including items such as boats and trailers
- Lease cancellation charges (but not rent)
- Legal fees, notary fees, and transfer/registration of title taxes for the new residence (minus GST or HST)
- The cost of selling your previous home, including marketing your home, agent commissions, mortgage penalties for premature payoff, and legal fees
- Administrative costs for changing address, replacing driver's licenses and non-commercial vehicle permits (minus insurance), and costs related to hooking up or disconnecting utilities
- Up to 15 days' worth of meals and temporary accommodation near the old and new residences for you and your household
- Up to $5,000 worth of interest, property taxes, insurance premiums, heating, and utilities to maintain your old residence, so long as it's unoccupied and you're making efforts to sell it
While it's sometimes advisable to wait to sell your home until market conditions are more favourable, in this case, it will result in you losing the $5,000 maintenance deduction. It may still be advisable to wait, but it's something to keep in mind.
All these expenses should be kept track of through receipts to ensure that they can be claimed when filing taxes. You aren't required to file them with your return, but you'll want to have them available in case the CRA wants to review them.
Standard Deductions for Moving Expenses
If you're dreading having to keep track of every travel receipt, you might want to opt for the standard deduction. For convenience, the CRA allows taxpayers to claim a fixed amount for travel and meal expenses. The standardized rate for meals is up to $17 per meal, with a maximum of $51 per day, for each household member. There's also a set rate per kilometre of travel, which is different depending on location. The rate is set by the province or territory where the travel begins, and rates range from 45 cents in Alberta to 60.5 cents in the Yukon Territory.
What Moving Expenses Can't Be Deducted?
- Repairs and renovations before selling
- Selling your home at a loss
- Expenses other than those specifically mentioned to buy your new home
- Travel expenses for job-hunting or house-hunting at the new location
- Cleaning and repair expenses for rented property
- Cost to replace personal-use items
- Mail forwarding costs
- Mortgage default insurance
- Items without a supporting receipt
For other expenses not listed here, it's safest to assume that if it's not specifically mentioned as a deductible expense, you probably shouldn't try to deduct it. You may appeal a denied claim, but the legal expenses might not be worth it. If you have any uncertainty about whether an expense is deductible, it's best to consult a tax professional.
You Can Save Money When You Move
Moving expenses can really stack up, so deducting them from your income tax return can be a welcome tax break. You'll need to make sure that your move meets the requirements set by the CRA and keep all relevant records and receipts in order to take advantage of these deductions, but with careful planning and preparation, you could end up saving some money come tax time.
Do you need to sell your home quickly for a job relocation? Get in touch with The Justin Havre Real Estate Team. We have the experience you need to sell your home for top dollar on your timeline.