You’ve probably heard that the real estate market has been booming this year, maybe you’ve even made a big move yourself, or are planning to shortly.
If that’s the case, we’ve got news for you - you may be able to deduct your moving expenses from your 2021 tax return, even if you moved to a rental property.
There are two main reasons for moving that will allow you to deduct your moving expenses:
- You are moving for work
- You are moving for school
If you are moving for work, it must be to a new place of work, whether you were transferred, found a new job somewhere else or are moving for self-employment. The move must also bring you at least 40 km closer to your place of work.
As a student, you can claim expenses related to your move if you moved 40 km closer to study as a full-time student at an eligible post-secondary institution, or you moved 40 km to take a summer job even if you’re moving back in with your parents.
In situations where the move was made for work (including students moving for summer jobs), the expenses can only be deducted from employment income related to the new job.
When you move to be a student at a post-secondary institute, your expenses can only be deducted from scholarships, fellowships, bursaries, research grants and some prizes that must be included in your income. In both cases, however, deductions can be carried forward to reduce eligible income from future years.
To claim eligible expenses, you are required to maintain supporting documentation, specifically receipts for the expenses paid. While the Canada Revenue Agency (CRA) doesn’t require you to file these with your return, they will expect you to produce them, if they are requested.
There is, however, an alternative method (the simplified method), which does not require keeping track of your receipts, and that is claiming a standardized amount approved by the CRA and applicable legislation.
This method allows taxpayers to claim a flat rate for moving related expenses. Using the flat rate method, each family member can claim a per day or km amount for meals, accommodations and driving.
What moving expenses can you deduct?
Traveling expenses
- Vehicle expenses
- Meals
- Accommodations
NOTE: All members of the family are not required to travel together at the same time.
Transportation and storage
- Packing
- Hauling
- Movers
- In-transit storage
- Insurance
Temporary expenses
- Meals for up to 15 days near the old or new residence
- Accommodations for up to 15 days near the old or new residence
Selling costs
- Lease cancellation charges
- Advertising
- Notary or legal fees
- Real estate commissions
- Mortgage penalties
- Cost of disconnecting utilities
Purchasing costs
- Legal or notary fees for the purchase of the new residence
- Taxes paid for the transfer or registration of title to new residence
- Cost of hooking up utilities
Maintenance on vacant home
The following costs (up to $5,000 total) are allowed so long as efforts are being made to sell the home:
- Interest
- Property taxes
- Insurance premiums
- Heat and utilities
Other expenses
- Cost of changing address on legal documents
- Replacing driving licenses and non-commercial vehicle permits
What moving expenses aren’t deductible?
While many expenses are allowed, there are costs that are not eligible for the moving expense deduction. These include:
- Work done to the old residence in preparation for selling
- Losses on sale of residence
- Job-hunting expenses
- House-hunting trips
- Cleaning and repair expenses in a rental unit
- Personal use items such as curtains and blinds
- Mail forwarding
- Mortgage default insurance
For help determining whether you’re eligible for the moving expense deduction and how much you’re eligible for, please contact us today for assistance with your personal tax situation..
