Moving expenses:  One of the Oldest Yet Most Missed Deductions

Evelyn Jacks

Did you know that the moving expenses deduction has been around since the 1972 taxation year?  It was one of the original provisions of the Budget 1971 – which introduced the last major tax reform in Canada.  It was originally intended to recognize the expenses incurred in moving to a new job or educational institute to study and since has been extended to include moves to new locations for self employment purposes as well.  About 85,000 people claimed this deduction based on most recent statistics and it is quite lucrative.  Here’s what’s claimable:

Where to claim it.  This deduction is claimed on line 21900 and Form T1-M Moving Expenses Deduction is required. Claims made must be justified with receipts as this deduction is frequently audited.

Eligible Taxpayers.  To qualify, the taxpayer must earn income at the new location. This income may be

• salary, wages (including amounts received under the Wage Earner Protection Program Act in respect of work at the new location) or
• self-employment income.

Income at New Location is Required.  In addition, the taxpayer must cease working or operating a business at the old location and establish a new home where the taxpayer and family will reside.

The following income sources earned at the new location will not be considered qualifying income for the purposes of claiming moving expenses:

• investment income
• employment insurance benefits
• other income sources, except student awards (see below).

Eligible Expenses.  The term "moving expenses" is defined in S. 62(3) of the Income Tax Act. Most expenses for moving to the new location are eligible and include the following:

• cost of selling the former residence, including real estate commissions, penalties for paying off a mortgage, legal fees, and advertising costs
• costs of keeping a vacant old residence (to a maximum of $5,000) while actively attempting to sell it, including mortgage interest, property taxes, insurance premiums and heat and power
• expenses of purchasing the new home (as long as the old home was owned), including transfer taxes and legal fees

• temporary living expenses (meals and lodging) for up to 15 days
  • removal and storage costs, including insurance for household effects, costs of moving a boat, trailer, or mobile home (to the extent the costs of moving the mobile do not exceed the costs of moving the contents alone)
• transportation costs and the costs of meals enroute (100% - no 50% restriction as is required when claiming entertainment expenses)
• cost of cancelling an unexpired lease
• cost of revising legal documents to show the new address, replacing driver's licenses and auto permits, cost of utility connections and disconnections

Students claiming moving expenses may be affected by the rules, which exempt scholarship, bursary and fellowship income when students attend classes full-time.   Where non-taxable scholarship or bursary income is the student's only income, they may be unable to claim moving expenses.

There is also a list of ineligible expenses.  For  more information, see Form T1M and enrol in Knowledge Bureau’s Advanced Tax Update Course, available online now.