Whether the move is a long-distance one to another province, or just a short-haul move to a nearby city, moving is both stressful and expensive. While our tax system can't do anything to help with the non-financial costs and general stress of moving, it does, in some circumstances, minimize the financial hit by providing a deduction from income for moving expenses incurred.
The general rules governing the deductibility of moving expenses haven't really changed in quite some time. However, there are always situations which involve the application of those rules to novel situations, and the Canada Revenue Agency (CRA) was recently asked to rule on the application of the rules to one such situation.
First, some general background on the rules governing the deduction of moving expenses. Not all moves will qualify for tax relief, as the tax rules provide that most moving costs will be deductible from employment or business income only where a taxpayer moves to be at least 40 kilometres closer to his or her place of work (for example, a taxpayer who moves from Toronto to take a job in Vancouver or Regina or Ottawa).The 40 kilometre distance is measured using the shortest route normally available to the travelling public, which in most cases would mean the distance by road. And, moving to be closer to work doesn't have to mean moving to a new company: a job transfer to another city while continuing to work for the same employer will qualify, assuming the 40-kilometre criterion is met. A deduction is also available where someone who is unemployed moves to start a new job, again assuming that all other required criteria are met.
The situation which the CRA was asked to consider in the recent technical interpretation involved a taxpayer who had moved more than once during a single taxation year, with some of those moves being temporary ones. Making multiple moves during a single tax year for work-related reasons isn't common, but it's no longer rare. For Canadians, especially younger Canadians starting out, the economic reality is increasingly one of short-term or contract positions and the need to be mobile in order to take advantage of such positions whenever and wherever they become available.
The CRA was asked whether the fact that a taxpayer had moved several times in one year and that at least some of those moves were temporary in nature would disqualify related expenses from being deducted. The answer, generally, was that it would not. The CRA's view was that each move would be treated as separate and would need to qualify as an "eligible relocation" (that is, would need to be for the purpose of obtaining employment and would have to meet the 40-kilometre criteria) to allow a claim for moving-related expenses. In other words, no matter how many moves a taxpayer might make during the year, expenses related to those moves will be deductible as long as the usual criteria for such a deduction is met.
The CRA also indicated that the temporary nature of a move would not in and of itself invalidate the deductibility of related moving expenses. Once again, the Agency referred back to the general rules on moving expense deductibility, indicating that in order for a move to qualify as an eligible relocation, the taxpayer must have "ordinarily resided" in both the old and new locations. Even if the taxpayer does not intend to stay in the new location permanently, he or she must settle into the new location and centralize his or her mode of living in that location to be considered as ordinarily residing there. Where, however, the taxpayer is not considered to ordinarily reside at a location, the move will be temporary and will not be treated as a separate move. To illustrate different scenarios, the CRA provided the following example.
If X ordinarily resided in the three houses, only moving expenses related to the first move from House A to House B are deductible. Expenses for the move to House C are disallowed because the move did not occur to enable X to take on a new job and therefore is not considered an eligible relocation.
If X did not ordinarily reside in House B, the move from House A to House B is a temporary one and the move from House A to House C is the eligible relocation. Therefore, all moving expenses related to the move from House A to House C are deductible.
Finally, as part of its technical interpretation, the CRA was asked to consider whether long-term storage costs for the taxpayer's belongings would qualify as a deductible moving cost. The answer was no. While the rules on the deduction of moving costs do allow for the deduction of the cost of transporting or storing household effects during the move between two residences, the CRA's view was that such costs related only to short-term storage related to the move. Long-term storage costs were not likely to be ones incurred "in the course of moving" and, consequently, would not be deductible as moving expenses.
The rules governing the deduction of moving expenses are outlined in some detail on the CRA's T1-M form. The current version of the form, which was updated early in 2013, can be found on the CRA Web site athttp://www.cra-arc.gc.ca/E/pbg/tf/t1-m/README.html, and more information on the tax treatment of moving costs is available on the same Web site at http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns206-236/219/menu-eng.html
Any questions not answered by the form or on the Web site can be directed to the CRA's individual enquiries line at 1-800-959-8281.