If December is moving month for you, three pieces of advice: tax a deep breath, treat yourself to some extra eggnog, and keep those moving expense receipts handy. They will be worth a lot of money when you file your tax return.
To be eligible, the move to your new home must be at least 40 km closer to the new work location than the old home. Generally the move must be within Canada, although students may claim moving expenses to attend a school outside Canada if they are otherwise eligible. Expenses may be claimable on moves to or from Canada if the taxpayer is a full-time student, or a factual or deemed resident.
Moving before the end of the year to a lower taxed province will bring another pleasant surprise: income for the whole year will be taxed at that province’s lower tax rates.
Do I have to earn income at the new location to qualify? The answer is yes and it must be actively earned. That means moves to a retirement home won’t qualify unless you work or are self-employed at the new location. Certain students may also make the claim. Income includes:
- salary, wages (including amounts received under the Wage Earner Protection Program Act in respect of work at the new location); or
- self-employment income.
In addition, the taxpayer must establish a new home where the taxpayer and family will reside. For the purposes of claiming moving expenses, the following income sources are not eligible:
- • investment or pension income
- • Employment Insurance benefits
- • other income sources, except taxable student awards (see below).
What this means is that if you are unemployed and move to get a job in another province, you’ll have to earn qualifying income before moving expenses are claimable. In another example, those who move and retire will need to get a job or start a business, at least for a little while, if they want to have qualifying income against which to deduct moving expenses.
If the taxpayer’s income at the new location is not sufficient to claim all moving expenses in the year of the move, they may be carried forward and applied against income at the new location in the following year or years.
Expenses relating to the move that are not paid until the next taxation year may be deducted in the year they were paid if income at the new location is sufficient or they may be carried forward to the following years.