When it comes to managing your expenses, every little bit counts. You try and fill up your car with gas when the price per litre is low. You stock up on grocery essentials when your family’s favourite items go on sale. Black Friday and Boxing Day are two of the biggest and busiest shopping days of the year because that’s when you find the best deals. Price is always top-of-mind.
Tax time in Canada is another one of those milestones when every penny counts. The less you owe or the more you get back are mission-critical during tax season, with Canadians and accountants exploring every possible opportunity to write off an expense and lower your tax burden. And if you’ve moved over the past year, one of the questions you’ll be asking yourself is can I claim moving expenses on my tax return in Canada?
As with all tax-related questions, the answer is that it depends.
The 40 km rule
To be eligible for a deduction, your move must be at least 40 kilometres closer to your new place of work or business than your previous home. That’s a lot of distance! The distance travelled from North York to downtown Toronto is likely less than 40 km. How about the distance between Mimico, Etobicoke, and Bluffer’s Park, Scarborough? Still less than 40 km. Naturally, you can’t base your entire move on scoring a better tax refund, but the 40 km rule is good to make-or-break scenario to keep in mind before getting lost in the inner workings of your tax return.
The keeping it legit rule
Another proviso is that the move must be from one primary residence to another. If you’re fortunate enough to be moving from one a pied-à-terre to another, you can forget about claiming your moving expenses on your tax return in Canada. Interestingly enough, however, your move doesn’t exclusively have to take place on Canadian soil. If you are a deemed or factual resident of Canada and you’re making a move from one primary residence to another, you can still make a claim. This includes individuals who are an employee or are self-employed and moving from outside Canada to a new work location in Canada, from Canada to a new work location outside of Canada, and even between two locations outside of Canada.
Eligible moving expenses
There’s a surprisingly robust list of moving expenses that you can claim on Line 21900 of your tax return. Obviously, transportation and storage costs such as packing and hauling, hiring professional Rent-a-Son movers, in-transit storage and insurance for all household items including boats and trailers can be claimed. Travel expenses can also be claimed including vehicle expenses, meals and even accommodations if needed. Need temporary living expenses are part of your move? The good news is you can claim those expenses, too. Just make sure to hold onto your receipts just in case. Better yet, take a picture of your receipts as backup in case those valuable receipts get lost in the move!
Another interesting claim you can make is the cost of cancelling the lease for your hold home. Rental payments for any time prior to the cancellation of the lease, however, are not claimable, regardless of whether you occupied the home during this period or not. Incidental costs can also be claimed on good-old Line 21900 such as changing your address on legal documents, replacing driver’s licences and even utility hook-ups and disconnections. Finally, you can claim the cost of maintaining your old home (such as mortgage interest, property taxes, insurance premiums and the cost of heating/utilities) when left vacant after you’ve moved up to a maximum of $5,000 – provided you’ve made reasonable efforts to sell your home.
Expenses you cannot deduct
The list of deductions you can make sounds pretty fair, right? Likewise, the expenses you cannot deduct seem pretty intuitive, too. Moving expenses you cannot claim include work done to make your old home more saleable, costs incurred in the sale of your old home if you delayed selling while hoping for the real estate market to improve, any loss incurred from the sale of your home, and travel expenses incurred when on house-hunting and job-hunting trips.
You also cannot deduct expenses incurred to clean or repair a rented home to bring the property up to the landlord’s standards, the cost to replace personal-use items such as firewood, drapes and carpets, and the value of items your movers are not legally able to move such as paint and cleaning products, plants and frozen foods. Mail-forwarding costs such as with Canada Post, and mortgage default insurance costs are also not claimable expenses.
The honest truth
The good news is that you can definitely claim moving expenses on your tax return in Canada. It’s a fairly long list of items one can claim, and there’s a logical relationship between all the yay items versus all the nay items. Generally, if an expense is directly related to your move, you can claim it; if it’s not directly related or it feels like you’re reaching, you can’t claim it. If you’re still not clear on how to claim moving expenses on your tax return in Canada, consult with an experienced and knowledgeable accountant. Just like when hiring Rent-a-Son Movers, there’s always greater peace of mind when you work with a professional.