Summer is a popular time to move for many reasons. This includes the absence of snow and, if you have children, the ability to have them ready to start at a new school in September. No matter how far you move, there are always a lot of related expenses, and if the relocation is required for employment purposes some of those costs may be a tax deduction.
You can only claim moving expenses if you meet two criteria. The first is you must move for employment purposes, whether it is a relocation or a new position. Or you can carry on a business at a new location. Second, the move has to be more than 40 kilometres. Without meeting both conditions, expenses cannot be claimed.
But if you qualify, the following are valid expenses: transportation and storage costs, travel expenses to move you and your family to your new place, up to a total of 15 days of temporary accommodation (if needed) and the cost of cancelling your lease at your old residence.
Also, if you own your home, legal fees to purchase a new residence, taxes on the transfer of title and the cost of selling your old residence can be deducted. This includes the mortgage penalty for breaking your mortgage before maturity. Incidentals like the cost of connecting utilities in your new location can also be added to your receipts.
After reading this list, you probably realize that moving more than 40 kilometres for employment reasons could lead to a sizable tax deduction. However, there is one further condition to keep in mind. You can only deduct your expenses against the employment income in your new location. This means if you move later in the year, you may not have enough income to deduct all of your moving expenses. You can carry forward unused amounts to the following year or your spouse or common-law partner can claim the remainder, but again it must be against employment income earned in the new location.
But, for tax purposes, you do not require a new job immediately following a move. There is no specific time limit, but the purpose of the move must be to related to employment, so you would not be able to carry the expenses forward indefinitely without ever having employment income at the new location.
Moving expenses are one of the most reviewed tax credits, so you need to keep your receipts and documentation as the Canada Revenue Agency will likely ask for them. If you did not hold onto all gas and meal receipts, you have the option of using the simplified method to calculate your vehicle and meal expenses. This means you can claim $17 per meal, for a total of up to $51 per day for each family member moving. And mileage is based on a per-kilometre rate established by the CRA. But even if you do use the simplified method, you should have some proof of your costs. You will need to complete a T1-M Moving Expenses form as part of your personal return to claim the deduction. If you and your spouse or common-law partner are splitting the expenses, both of you need to complete this form.
And I simply can’t stress this enough: make sure you keep your receipts, paperwork and any other documents, so you can prove your claim if the CRA asks.