Saving tax with moving expense deductions – BDO’s Scott Conner explains

Saving tax with moving expense deductions

Experts say that one of the most stressful times in someone’s life is moving residences. Reasons include coping with change, transitioning, and unfamiliar environments. With all of this going on, we can’t overlook the tax deductions that are sitting there for the taking in many circumstances.

Even though you think you have deductible moving expenses, no moving expense deduction can be claimed unless it meets the strict definition of an eligible relocation in the Income Tax Act.

Go the distance

The distance between the old residence and the new work location cannot be less than 40 km greater than the distance between the new residence in the new work location. Whether one has moved at least 40 km is based on road distance, not as the ‘crow flies’. Also, it should be a realistic measurement of a normal route.

To work or to learn

The relocation must enable the taxpayer to carry on a business or be employed, or be a student in full-time attendance enrolled in a program at a post-secondary level. In other words, if you do not move “to enable” yourself to start a business, take a job, etc. you likely cannot deduct your moving expenses.

Working from home

For a person with the home office moving to a new work location in the same location as the person’s new residence qualifies. CRA has noted that there must be a causal link between the move and the new work location, so someone moving their home office might not qualify.

Home not in Canada

An old or new home outside of Canada will still qualify if the taxpayer is resident in Canada and is taxed on their worldwide income. However, each home must meet the “ordinarily resided” test, so moving to a temporary job outside Canada while keeping a home here (as well as your spouse and minor children in Canada) will not qualify as an eligible relocation.

Timing is not always everything

There is no time limit on the move (even several years after the job relocation), as long as the move was due to the change of work location. Even moves in excess of 12 months before finding new employment qualified in certain cases. The CRA accepts this concept in various cases.

No income, no problem

Moving expenses that cannot be deducted because the taxpayer has no business or employment income in the new work location, or simply no job yet, can be carried forward and deducted against such income in any later year.

You break it, you bought it

The list of actual moving expenses is extensive including big ticket items like the cost of movers and selling costs you pay in respect of the old residence. It does not, however, include deductions for replacing property that was damaged in the move, or any new furniture purchased for the new residence.

If you have questions about moving expenses, contact the Huntsville office of BDO at 705-789-4469.

Scott Conner is a Tax Partner at BDO Canada LLP. With over 15 years of experience as CPA, CA specializing in Canadian income tax, Scott helps a variety of individuals and private companies pay the least amount of tax possible with great tax planning strategies. He also specializes in planning for estates, trusts, and non-resident dispositions of real estate.

Scott Conner, CPA, CA
Tax Partner
BDO Canada LLP
Direct: 705 789 4469 ext 1824
[email protected]