|Complicated rules for a simple situation|
When an individual moves from one city to another, the issue that
often arises is whether related moving expenses are deductible for tax purposes.
In order for moving expenses to be deductible, the expenses must be
“moving expenses.” The move must be an “eligible relocation.” An eligible
relocation is defined to be a relocation that enabled the taxpayer to:
- carry on a business or to be employed at a new location in Canada;
- be a student in full-time attendance enrolled in a program at a
post-secondary level at a location of a university, college or other
Both the old and the new residences must be in Canada. The distance
between the old residence and the new residence must be at least 40 kilometres.
Once it has been determined that an eligible relocation has occurred,
the next point is whether the expenses paid are moving expenses for tax
Expenses included in the definition of moving expenses are:
- Travel costs, including a reasonable amount for meals and lodging;
- The cost of transporting or storing household effects;
- The cost of meals and lodging for a period not exceeding 15 days;
- The cost of cancelling a lease;
- Selling costs in respect of the sale of the former residence;
- The cost of legal services in respect of the purchase of the new
residence and any tax, fee or duty (excluded GST) imposed on the transfer
or registration of title if the taxpayer had sold the old residence. If
a taxpayer moves from a rental property and purchases a residence, legal
fees and land transfer taxes relating to the purchase are not considered
to be moving expenses. If, however, the individual moves from one residence
to another, they are deductible;
- Interest, property taxes, insurance premiums and the cost of heating
and utilities in respect of the old residence to the extent that they do
not exceed $5,000 and they are for a period in which the taxpayer does not
live in the old residence and in which the taxpayer is making “reasonable
efforts” to sell the old residence; and
- The cost of revising legal documents to reflect the taxpayer’s new
Students may deduct moving expenses if they move from a residence in
Canada or to a university in Canada. They do not have to move between a
Canadian residence and a Canadian university.
Once a taxpayer has met the test of an eligible relocation and the
definition of moving expenses, the amount to be deducted cannot exceed
the income earned at the new employment, or business or scholarship income
for a student.
As you can see, these are complicated rules for a simple situation.
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The material provided in Tax Tip of the Week is believed to be accurate and reliable as of the date it is written. Tax laws are complex and are subject to frequent change. Professional advice should always be sought before implementing any tax planning arrangements. Neither the Tax Specialist Group nor any member firm can accept any liability for the tax consequences that may result from acting based on the contents hereof.