Moving Expense deduction in Canada is a real tax-saving tool in the hands of individual taxpayers, which helps in reducing the total income and thereby lowering the taxes on your T1 personal income tax return. If an individual moves from his / her old house to a new house due to employment or business or even for post-secondary studies shall be eligible for a Moving Expense deduction subject to fulfillment of certain conditions.
Conditions –
- Purpose of the move to new house from old House: -WorkSelf-Employment / BusinessStudy of any program which is a full-time post-secondary program
- The new home must reduce your distance to the work location by 40 km or more, as compared to your old home.
Nature of Moving Expenses: -
The eligible expenses which can be claimed as a moving expense deduction while filing your T1 Income Tax Return includes: -
- Travel, Meals, and Lodging Expenses for the Taxpayer and family. If the travel is done using a vehicle then the same is also allowed as a deduction. The Tavel and meal expenses can be claimed as actuals i.e. under the Detailed method or may be claimed at a flat rate prescribed by the CRA under the simplified method.
- Detailed method offers to claim the actual eligible expenses incurred on the move. However, the Taxpayer is required to keep all the expense bills or receipts evidencing the expenses incurred on such move. The taxpayer can claim towards the actual reasonable expenses incurred on meals as well as travel expenses. If the vehicle is used for transportation or for the move then the running expenses as well as standing expenses like fuel, oil, tires, insurance, maintenance, depreciation, interest, etc. are allowed to the extent incurred for such move.
- Simplified Method on the other hand as the name signifies offers a simple method of claiming your moving expenses. Under the Simplified method, instead of claiming the actual expenses, the taxpayer can claim the flat rate as prescribed by the CRA, which varies from province to province and can get rid of keeping the record of entire receipts or bills of expenses incurred.
- As per flat rate under the simplified method, a taxpayer can claim towards the meal expenses at the rate of $23 per meal per person and aggregating $69 for one day. Whereas for travel by vehicle, a flat rate of 59 cents per kilometer (Ontario province) has been prescribed by the CRA.
- Transportation of household goods – Amount incurred toward transportation and storing of household items can also be claimed as moving expense.
- Certain expenses related to the old house for e.g. in the case of a leasehold house, the lease cancellation expenses incurred, or in the case of an owned house, the expenses incurred to sell the same subject to a maximum cap of $5,000 are also allowed to be claimed.
- In case the old house is sold and the new house is purchased then some expenses like legal fees or taxes (excluding HST / GST) can be claimed as moving expenses.
Points to remember –
- It is also important to note that in case the employer or some other person re-imburses the part or entire expenses towards the move, then the claim of the moving expenses must be reduced (or not claimed) to the extent of such reimbursement.
- Carry forward of unclaimed Moving Expenses – In case the total income of the tax year is lower than the number of moving expenses, then the balance (unclaimed) of moving expenses that cannot be adjusted in the tax year then the same may be carried forward to future years.
File your T1 Income Tax Return (T1 Personal Tax Return) to claim the moving expense deduction: -
The Moving expenses can be claimed by completing Form T1-M while filing your T1 Income Tax Return. The moving expenses amount is claimed at line 21900 of your T1 Income Tax Return.
The CRA has provided an Income Tax folio (i.e. ‘S1-F3-C4’) on Moving Expenses which covers a detailed interpretation of the eligibility, conditions, and other related topics for claiming the moving expense deduction.
The correct claim/ deduction of moving expenses can help you lower your taxes or may get you a refund. At Account Tax Pros, we help our clients in personal t1 tax return filing to maximize their eligible benefits/credits with our knowledge and expertise.
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