|If you happened to relocate or plan to change locations for work-related reasons, you may be worrying about the strain it will have on your wallet. We have good news: you can deduct your moving expenses on your taxes!
Who can deduct
The basic rule is, if you have moved 40 kilometres closer to a new job than your old location - even if it’s just seasonal work or to start a business within Canada - you are eligible to receive money back on your tax return for the expenses you amassed while moving.
These expenses can only be deducted from the income earned at your new job or while self-employed, but, if your expenses are more than your earned income, the excess can be carried over and used as a deduction the following year.
A wide variety of expenses are deductible on your tax return, including costs accrued before, during and after your move. For example, the cost of a moving company.
These expenses are:
- The cost of moving your household (a van, storage space, moving insurance, etc.)
- All travel expenses including use of vehicles
- Meals and hotels used on the way to your new home (covered for up to 15 days for you and each member of your family)
- Legal fees and land transfer fees from your new home (assuming you sold your old home)
- Costs charged because you cancelled your lease at your old residence
- Costs incurred from selling your old residence (legal fees, real estate commissions, etc.)
- Money it cost to maintain your old home while it was vacant (up to $5,000 covered if applicable)
- The cost of disconnecting your old utilities and hooking up new utilities
- Any others moving related costs (changing your address, applying for a new driver’s license, etc.)
Expensing automobiles and meals
You have two options when it comes to vehicle and food expenses, and that can be to either claim the actual costs or charge a flat rate.
- Expensing the actual cost involves holding onto copies of all receipts and expensing the exact amount used during your travel
- This is called the "detailed method" by the Canadian Revenue Agency (CRA)
- Expensing the flat rate is referred to as the "simplified method" by the CRA and changes from year to year and provinceto province
- These flat rate costs are updated annually and posted to the CRA’s website
Expenses not covered
Sadly, not all your expenses will be tax deductible. These include:
- Travel expenses while house hunting and job hunting in another city
- Losses from the sale of your home or while delaying the sale of your home (waiting for the market to improve, investment reasons, etc.)
- Expenses that occurred while fixing up your former residence for a landlord, or to make your home more sellable
- The cost of items that movers refused to take with them (plants, chemicals, perishables, etc.)
- Cost of replacing "personal-use items" (drapes, carpeting, toolsheds, etc.)
- Mail-forwarding services
- Mortgage default insurance
- Transformers or adapters required for household appliances
The only moving expenses you may deduct are ones paid for by yourself. Expenses covered by your new employer or that you were later reimbursed for by the aforementioned employer are not eligible.
However, if you were given an allowance for your move (up to $650 assuming you can prove your moving expenses were relatively equal to the allowance given), this must be included in your income earned for the year.
Any eligible moving expenses can then be counted as deductions.
Employer -paid reimbursements
Assuming you can get an employer to cover your costs, reimbursements are highly recommended over deducting a move on your taxes.
Of course this is not always feasible, and that’s where the moving deductions come in.
- When you are reimbursed by your employer for a move you break even (moving deductions would only pay you back around $0.50 to the dollar on your tax return)
- Not all moving costs are considered tax deductible
- You don’t have to wait for your tax return to get money back on your move
- No need to keep track of receipts or figure out the flat rate it cost you to move
Claiming on your tax return
You can claim your moving expenses on your taxes by using the T1 -M form, helpfully called "Moving Expenses Deduction."
It’s as simple as reporting where you moved to and from, the reason for your move, the start date of your new job and the total amount of your moving costs.
TIP: While you are not required to file the T1 -M form or include moving receipts with your tax return, it is recommended that you hold onto them in case the CRA requests to see evidence of your recent moving expenses. After all, it’s better to be safe than sorry.