Is your move deductible?
The Canada Revenue Agency (CRA) may allow you to deduct certain moving expenses from future earnings if a job change or an upgrading in your education motivates your move. In order to qualify you must be moving to start a new job or business, or to attend a post-secondary educational institution on a full time basis. Additionally, your new residence must be located at least 40 kilometers closer to your workplace or school than the old one was.
If the nature of your move meets CRA’s qualifications, here are some of the expenses that may be deductible against future income:
- Selling costs of your old residence, including real estate commissions.
- Mortgage pre-payment penalties.
- Early cancellation penalties on a residential lease.
- Legal fees & disbursements on the sale of your old home.
- Legal fees & disbursements incurred on the purchase of your new home.
- Travel expenses to your new location (including meals and hotel).
- Costs incurred in moving your personal belongings.
- Advertising costs to market your old home (private sale).
- Utility connections and disconnections.
- Meals and accommodations for up to 15 days if possession dates do not coincide.
- Up to $5,000.00 in mortgage interest, property taxes and utility costs incurred at your old home while you are attempting to sell it (3 month maximum).
Of course, there are certain expenses that you may incur during your move that CRA will not consider being deductible. They include capitol losses that you may realize when you sell your old home, expenses for house hunting trips, and any costs for improvements at your old home.
It should be noted that this deduction is applicable to future earnings in your new location and not past earnings. However, allowable deductions can be carried forward to future tax years. Further, the allowable deduction would be reduced by any reimbursements that you receive from your employer.
As real estate agents, we are not experts when it comes to income tax and potential deductions. While we believe this list of allowable deductions is complete, there may be others that qualify. Further, you personal circumstances may have some other bearing on your ability to qualify for these deductions. Please consult with your accountant to ensure that you receive the full benefits that are provided by CRA. Depending on your tax bracket, over half of your moving expenses could be returned to you in the form of a tax deduction.