On The Move? Tax Relief Can Reduce Financial Stress

Summer is here and it’s moving season. Exciting yet stressful, this life event can be lucrative from a tax viewpoint. 

Many families choose to relocate at this time of year so they can get settled in before the new school year. Moving can be stressful because it involves major change and upheaval and lots of decisions to purge: clothes, tools and documents. In fact, for many people, moving ranks right up there with some of life’s most stressful events, such as the death of a loved one, and divorce or separation.

There is a silver lining in all of this, because some moving expenses are tax deductible. Being able to claim some of your money back may help to take some of the sting out of moving.  In fact, many tax advisors can help families keep track of moving costs in this chaotic time by scanning receipts into electronic drawers courtesy of their tax software. A visit to your tax specialist before you move, therefore, is a must-do.

So what’s deductible? The moving expenses deduction is available to employees, self-employed people and students, as long as the new home is at least 40 km closer to the new work location than the old home; and as long as income is earned at the new location, in the form of salary, wages, self-employment income or student awards. Be aware if you earn only investment income, employment insurance benefits and other “passive income” including Employment Insurance (EI) you will not qualify for the deduction.

Little known eligible moving expenses include:

1. Costs of selling the former residence—real estate commissions, penalties for paying off a mortgage, legal fees and advertising costs

2. Costs of keeping a vacant old residence (to a maximum of $5,000) while actively trying to sell—mortgage interest, property taxes, insurance premiums, heat and power

3. Expenses of purchasing the new home (as long as the old home was owned), including transfer taxes and legal fees

4.Temporary living expenses (meals and lodging) for up to 15 days

5. Transportation, removal and storage costs including insurance for household effects

6. Costs of meals en route (100%, no 50% restriction)

Among the expenses that are not deductible:

• Costs incurred to make the former property more saleable

• losses on the sale of the former property

• expenses incurred before the move (such as house hunting or job hunting)

Students moving to attend full-time courses at a post-secondary school (or to work as a co-operative student in an industry relating to academic studies) may claim moving expenses against the taxable portion of the following types of qualifying income:

• research grants or other awards (e.g. prizes for achievement)

• income earned at summer jobs or employment/self-employment

Taxpayers who are reimbursed by their employer for moving expenses may deduct expenses only if the amount received as a reimbursement is included in income, or if the amounts claimed are reduced by the amount of the reimbursement.

Advisor Alert: Make sure you’re fully engaged with your clients, not only on the financial side. Being aware of their family situation and major life events can provide you with opportunities to solidify your position as a trusted advisor to them and their family... and really save them big money come tax filing season.

Client Alert: Don’t let the stress of moving get you down. Discuss the opportunity for tax relief from moving expenses with your advisor, and be sure to keep all those receipts so you can claim them!