After a slowdown in 2022, residential real estate sales are once again picking up across Canada.
With thousands of Canadians preparing to move homes by the end of the year, one thing is clear – moving is expensive. Whether you're moving for a new job, your dream home, or any other reason, costs can add up faster than you think. Especially when you’re moving long distances.
But did you know that this transition can also offer a silver lining?
Our tax system offers a way to offset some of those costs through the moving expense deduction. But it's not a magical solution for all as it’s only available in specific situations.
The Key to Eligibility
If you're simply upgrading your home without changing your work location, this deduction isn't for you.
To claim the moving expense deduction, you've got to meet a simple requirement. Your move must bring you at least 40 kilometers closer to your new workplace. This means the deduction is there for those taking a new job, starting a business, or transferring for work purposes.
The good news is, you don’t have to be a homeowner to claim this expense. If you are moving from an apartment to be 40km closer to your new workplace, you can claim this deduction. You can even claim it if you’re a student who's moving for a summer job (even if it is to move back home). You just have to meet the 40km requirement.
The eligible expenses you can claim cover various aspects of your move. Reasonable amounts can be claimed for:
- Travel expenses such as vehicle expenses, meals and lodging (you can claim this for all members of your household even if you do not travel together or at the same time)
- Cost of transporting and storing your personal effects including large items like boats and trailers
- Up to 15 days worth of meals and temporary accommodation near the old or new house for you or members of your family
- Lease cancellation charges excluding rent
- Legal and notary fees associated with buying a new home
- Registration of title and transfer taxes for new home
- Advertising costs, as well as notary and legal fees, commissions and mortgage penalties for old home
- Changing address on legal documents
- Cost of utility hookups and disconnects
You may also claim up to $5,000 for costs incurred to maintain your old residence while it is vacant and on the market if you choose to find a new home before selling. This $5,000 can be used towards interest, property taxes, insurance, and utilities.
From traveling expenses and transportation costs to temporary accommodation and legal fees for your new home – they all count. Just as long as you have supporting documentation and receipts. You don't need to send them with your tax return but you do need to keep them safe in case the CRA asks for proof.
But remember, these deductions are for employment or self-employment income earned at the new location, not investment income or employment insurance benefits. If you're moving late in the year and aren’t planning to make a lot before the new year - you can carryforward your moving expense deduction to future years.
What’s Not Deductible
While it might appear from the preceding information that almost all expenses related to moving can be deducted, there are certain costs that the Canada Revenue Agency (CRA) doesn't allow for deduction, as outlined below:
- Costs related to enhancing the saleability of the old residence.
- Losses incurred from selling the old residence.
- Expenses connected to trips for job-hunting or house-hunting in another city (like travel expenses for job interviews or meetings with real estate agents).
- Costs for cleaning or repairing a rental property to meet the landlord's standards.
- Expenses for replacing personal-use items like drapery and carpets.
- Charges associated with mail forwarding.
- Mortgage default insurance fees.
Keeping it Simple
If you want to keep things a bit more simple, there’s one more thing you should know about.
Instead of grappling with countless receipts, you can opt for standardized amounts for certain expenses. That means less paperwork and less hassle. For instance, you can claim a fixed amount for travel (per-kilometer rate of $0.55 to $0.67 in 2022 depending on where you’re moving from) and meal expenses (up to $23 per meal for up to 3 meals in 2022), making life easier during tax time.
Interested in learning more? Contact the Koroll & Company team of chartered professional accountants today.
The rates for standardized travel and meal expenses change each year. The Canada Revenue Agency (CRA) releases these rates on its website early in the tax filing season.
Consider the Moving Expense Deduction When You Move
If you’re planning on moving to be closer to a new place of work, don’t forget to consider this deduction. While it shouldn’t be your primary reason for choosing one place over another, keeping the 40 km rule in mind can play a role in where you decide to look for a new home.
Moving will always bring some stress, but it doesn't have to break the bank. Understanding the moving expense deduction is your ticket to keeping more of your hard-earned money in your pocket.