Commonly Missed Deductions Part 1: Moving Expenses
Did you recently move to start a new job, start a business, or go to university? If you answered yes, be sure to keep all your receipts because you can write-off these moving expenses on your tax return.
First let’s determine if you qualify for this deduction.
The government states that you must meet the following factors to claim this deduction if you move to start a new job, or a business:
“a) it occurs to allow the individual to carry on a business or to be employed at a location (referred to as the new work location). The new work location must be in Canada unless the individual is absent from Canada, but resident in Canada;
b) before the move the individual ordinarily resided at a residence (referred to as the old residence) and after the move the individual ordinarily resided at a residence (referred to as the new residence);
c) both the old residence and the new residence are in Canada unless the individual is absent from Canada, but resident in Canada; and
d) the move allows the individual to be at least 40 kilometres closer to the new work location. The Federal Court of Appeal established in Giannakopoulos v M.N.R.,  3 FCR 294, 95 DTC 5477, that the 40 kilometre distance is measured using the shortest normal route available to the travelling public.”
Let me give an example to demonstrate these criteria. Let’s say an employee is working at the University of Alberta in Edmonton and lives in Edmonton. He gets a permanent job offer at the University of Calgary in Calgary and he accepts the offer and moves to Calgary. He would qualify to claim moving expenses as he is moving more than 40 kilometers to be employed at a new location.
Let me give another example. Let’s say an employee is working in Edmonton. Her parent in Calgary gets sick so the employee moves to Calgary to take care of her parent. While in Calgary, she finds a new job. She would not qualify to claim moving expenses because she moved to Calgary for personal purposes not for employment.
You are able to claim a variety of moving expenses including:
- Transportation and storage costs: This includes movers, storage of items being moved and insurance on items being moved.
- Travel expenses: This includes vehicle expenses, meals, and accommodation for you and other members of your household.
- Temporary living expenses: These expenses are incurred if you needed temporary housing before you are able to move into your new residence.
- Cost of cancelling your lease
- Incidental costs related to your move: Changing your address on legal documents, utility hook-ups, and replacing drivers licences.
- Cost of maintain old home when vacant: If you are not able to sell your old home before you have to move, you are able to claim some of the expenses to maintain this property when vacant. This is limited to $5,000.
- Cost of selling old home: Includes advertising, legal fees, real estate commissions, and mortgage prepayment penalty
- Costs of buying the new home: Legal fees and taxes paid for the transfer of the new home
If you received an allowance or reimbursement payment from your employer related to the move, you must either include this payment in your income or decrease your expense claim by this payment amount.
You can only write-off these moving expenses against income earned in your new location. If you do not have enough income in your first year of living in a new location, you can write-off your moving expenses in subsequent years when you have sufficient income.
The government reviews moving expenses fairly often so ensure that you keep all relevant receipts and send them in when the government asks for them.
If you have any questions or would like us to help you prepare your tax return please contact our office.
Shahir Makhani, CPA
Reference: Folio s1-f3-c4