The spring and summer months are the traditional time for moving in the Okanagan. Moving during these months allows us to both take advantage of the warmer weather and to get settled into the new location in time for the upcoming school year. People move for a lot of reasons—a new job or a job transfer, moving to be closer to family, moving when a growing family needs a larger home or, conversely, downsizing in anticipation of retirement. Whatever the reasons and whatever the distance, however, moving always involves costs and stress. Whether it’s the cost involved in preparing the current home to be put on the market, trips to the new location to search for a home, or just the cost of packing and transporting one’s belongings and driving to the new location, the financial outlay of moving can be considerable. In some circumstances, however, our tax system will provide for a deduction to help offset moving costs.
Not all moves will qualify for tax relief, but where a taxpayer moves to be at least 40 kilometres closer to his or her place of work (for example, a taxpayer who moves from Osoyoos to Penticton or even Penticton to Kelowna), most moving costs will be deductible from employment or business income earned at the new location. The 40 kilometre distance is measured using the shortest route normally available to the travelling public, which in most cases would mean the distance by road. And, moving to be closer to work doesn’t have to mean moving to a new company—a job transfer to another city while continuing to work for the same employer will qualify, assuming the 40-kilometre criterion is met. A deduction is also available where someone who is unemployed moves to start a new job or business, again assuming that all other required criteria are met.
The list of expenses which may be deducted is fairly comprehensive, but not all moving- related costs are deductible. Under the administrative policies of the Canada Revenue Agency (CRA), as outlined in their Form T1-M, Moving Expenses Deduction, the following are considered eligible moving expenses:
- traveling expenses, including vehicle expenses, meals and accommodation, to move the taxpayer and members of his or her family to their new residence (note that not all members of the household have to travel together or at the same time);
- transportation and storage costs (such as packing, hauling, in-transit storage, and insurance) for household effects, including items such as boats and trailers;
- costs for up to 15 days for meals and temporary accommodation near the old and the new residences for the members of the household;
- lease cancellation charges (but not rent) on the old residence;
- legal fees incurred for the purchase of the new residence, together with any taxes paid for the transfer or registration of title to the new residence (but excluding GST or HST and property taxes);
- the cost of selling the old residence, including advertising, notary or legal fees, real estate commissions, and any mortgage penalties paid when a mortgage is paid off before maturity;
- the cost of changing an address on legal documents, replacing driving licences and non-commercial vehicle permits (except insurance), and costs related to utility hook-ups and disconnections.
It sometimes happens that a move to the new home has to take place before the old residence is sold. In such circumstances, the taxpayer is entitled to deduct up to $5,000 in costs incurred for the maintenance of that residence while it is vacant and efforts are being made to sell it. Specifically, costs including interest, property taxes, insurance premiums, and heat and utilities expenses paid to maintain the old residence while efforts were being made to sell it may be deducted. If any family members are still living at the old residence, or it is being rented, no deduction is available.
It may seem from the foregoing that virtually all moving-related costs will be deductible; however, there are some costs for which the CRA will not permit a deduction to be claimed, as follows:
- expenses for work done to make the old residence more saleable;
- any loss incurred on the sale of the old residence;
- expenses for job-hunting or house-hunting trips to another city (for example, costs to travel to job interviews or meet with real estate agents);
- expenses incurred to clean or repair a rental residence to meet the landlord’s standards;
- costs to replace such personal-use items as drapery and carpets; and
- mail forwarding costs.
To claim a deduction for any eligible costs incurred, supporting receipts must be obtained. While the receipts do not have to be filed with the return on which the related deduction is claimed, they must be kept in case the CRA wants to review them.
Anyone who has ever moved knows that there are an endless number of details to be dealt with. In some cases, the administrative burden of claiming moving-related expenses can be minimized by choosing to claim a standardized amount for certain types of expenses. Specifically, the CRA allows taxpayers to claim a fixed amount, without the need for detailed receipts, for travel and meal expenses related to a move. Using that standardized, or flat rate method, taxpayers may claim up to $17 per meal, to a maximum of $51 per day, for each person in the household.
Similarly, the taxpayer can claim a set per-kilometre amount for kilometres driven in connection with the move. The per kilometre amount ranges from 45.5 cents for Saskatchewan to 63.5 cents for the Yukon Territory. These standardized expense rates are those which were in effect for the 2013 taxation year—the CRA will be posting the rates for 2014 on its website early in 2015, in time for the tax-filing season. It is in all cases the province or territory in which the travel begins which determines the applicable rate.
Any moving-related expenses can be deducted from employment or self-employment income (but not investment income or employment insurance benefits) earned at the new location. Where a move takes place late in the year, it’s possible, especially where the move is a long distance one, that such expenses will exceed income earned at the new location during the calendar year. In such cases, it’s possible to carry forward the excess expenses, and deduct them from income earned in subsequent years.
The rules governing the deduction of moving expenses are outlined in some detail on the CRA’s T1-M form. The current version of the form can be found on the CRA website at http://www.cra-arc.gc.ca/E/pbg/tf/t1-m/t1-m-13e.pdf, and more information on the tax treatment of moving costs is available on the same website at http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns206-236/219/menu-eng.html.
We encourage you to contact one of our knowledgeable accounting staff at White Kennedy if you require help understanding what you can and cannot expense with your move. With accounting offices in Penticton, West Kelowna and Osoyoos, we offer excellent business advice to help you prosper.
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.