Tax Planning: Labour Mobility Deduction for Tradespeople

The April 2022 federal budget, introduced a Labour Mobility Deduction for skilled tradespeople and apprentices who need to temporarily relocate for work. It’s important to advise eligible taxpayers about this, so they keep receipts to back up the claims retroactively to January 1, 2022.   

Why Does Labour Mobility Tax Deduction Matter?

The labour mobility tax deduction has been introduced to provide recognition that there is a labour shortage in the construction fields, in particular for projects that require a tradesperson to travel away from their home on a temporary basis.  It is the assumption that this deduction will assist these projects to continue to completion.  The intention is that apprentices from underrepresented groups such as women, indigenous individuals, newcomers, persons with disabilities and racialized persons may also benefit from this deduction. 

Who Does The Deduction Help?

1. Which category of employees are eligible? Skilled tradespeople in the construction industry and apprentices.  There is a possibility that this deduction will apply to red seal trades only, however, this deduction has not yet been included on the early version of the 2022 T1 returns to confirm whether this stipulation applies.
2. What qualifies as a temporary move?  A construction employee has to temporarily relocate at least 150 km. from their normal place of residence.  The relocation has to last at least 36 hours.  If the tradesperson travels more than once to a specific site, the limitation would be costs for one round trip.  If they travel to different sites, then the round trip stipulation would apply to each site.  
3. What is the maximum deduction? In 2022, the maximum deduction has been set as $4,000 for related expenses. 
4. What are eligible expenses?  You can claim the cost of temporary housing, one round trip transportation cost from the tradesperson’s normal residence to the temporary lodging plus meal costs when travelling to and from the temporary work site.  It is important to note that the normal place of residence must continue to be available while the employee was working remotely.  As well, should the employee be reimbursed by their employer for any of these expenses, only the non-reimbursed amount would be an eligible to claim as a deduction.  Tradespeople who normally reside in Canada are the only employees who are eligible for the deduction. 

Recap On The Labour Mobility Deduction:  What can you do to prepare for this change prior to tax season?  Inform your construction clients who could possibly benefit. Suggest that they gather relevant receipts.  Since this has been approved retroactively, there may be the need to reprint or locate receipts for the year. By being informed early, they will have a better chance to locate year-to-date receipts and save receipts going forward. 

Bottom Line: Review the 2022 T1 return software of your choice as it is updated.  Attend year-end tax updates to view the applicable line numbers and forms to understand the logistics of claiming this deduction.  By taking these steps now, there will be just one more reason your clients will value as their most trusted advisor.  Time for a happy dance? 

Diane Elliott, founder of Millennium Tax Services (1998) Cambridge, ON, DFA – Tax Services Specialist, RWM, long time instructor and author, Knowledge Bureau. 

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