When it comes time to move, it seems that the financial burden of moving expenses can leave quite a dent in your pocket book.  After paying for the cost of travel and transporting your goods, temporary living expenses, commission and legal expenses on selling and repurchasing a home, you almost have to put up a money tree at your house warming party just to pay for the first month’s rent or mortgage payment.  Since all these costs can add up to a substantial amount which may not always be covered by your new employer, Canada Revenue Agency has made available certain tax deductions for moving costs.

Who can deduct moving expenses?

For these moving expenses to qualify for a deduction, you must be a Canadian resident during the move and you must move 40 kilometres closer to your current or new work place.  It does not matter whether you are self-employed or an employee.  If these conditions are met, you can claim certain eligible deductions as outlined in a guide called “Are you Moving?” which is published by Canada Revenue Agency.

What expenses are deductible?

Moving expenses are limited to reasonable amounts paid for moving yourself and your family to your new residence and include, but are not limited to:

• Travel costs including fuel, meals and lodging while en route

• Transportation and storage costs for moving your household effects including packing, hauling, in-transit storage and insurance.

• Temporary living expenses including board and lodging costs for up to 15 days.

• Costs of selling your former home including advertising, notarial/ legal fees, real estate commissions, and mortgage penalties for early payouts.

• Costs of buying your new home including notarial/legal fees, registration of title, and BC property transfer tax (not GST which would be paid for a new home).

When can I deduct my expenses?

There are limitations to the expenses claimed besides being reasonable. First, you must deduct the moving expenses in the year you move. Second, expenses are limited to offset income earned at the new location. Any expenses not deducted in the year of the move can be claimed in the first year following the move.

If your employer generously reimburses you for your moving expenses, your claim is limited to the amounts not reimbursed.  This money is not a taxable benefit if reasonable compared to expenses incurred  A planning point is that you should consider requesting that your employer designate the money paid to you as covering ineligible moving expenses.  Therefore, you will have the best of both worlds—money received tax free from your employer for your move and still be eligible to deduct your net qualifying moving expenses.

Can students claim moving expenses?

Students, don’t feel left out.  As long as the rules above are adhered to and you carry at least a 60% course load, you too can claim moving expenses.  If you move to or from Canada, regardless of whether or not you attend a Canadian institution, your moving expenses qualify. For example, when you move home to take on a summer job, moving expenses can be claimed against your summer income.  Likewise, moving expenses to school can be claimed against scholarships, fellowships and grants.

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