by Ron Clarke
Moving is stressful and can be emotionally draining.
However, on a practical note, a moving expense claim can be a valuable deduction that should not be overlooked.
It’s not a simple process but the effort is typically worth it.
There are key criteria that must be met to make it an allowable claim.
Moving for work is the well known eligible reason for making a moving expense claim. The new home for the new work must be at least 40 km closer by the shortest public route to the new work.
A person moving for new employment is eligible for a moving expense claim provided they have a job offer in hand prior to moving to the job.
This also includes transfers within the same company.
In either case, a letter must be provided stating the job, start date and what, if any, moving expenses were covered by the employer noting whether these covered costs are included as taxable income.
Noteworthy, a person who is moving to start up their own business in a location that will be operational at least 40km away from their current home qualifies for a moving expense claim provided it can be proven that the move to the new location was necessary for the business to earn money.
The moving expenses must be deducted from income earned at the new place of work so if the move is late in the year, the moving expense claim is reported on the current tax return and then carried forward to the next tax year for claiming against the new work income.
Now let’s look at the case of an employer providing a moving allowance or reimbursing moving costs.
If an employer offers a standard moving allowance and the employer includes this in the employee’s income, the employee is then eligible to make a full claim of all allowable moving expenses to legitimately offset this additional taxable income.
When an employer directly reimburses for specific moving expenses, any cost that is reimbursed cannot be claimed as a moving expense because reimbursements are not factored into earned income.
However, if not all moving expenses are reimbursed, for those costs that are allowable expenses for tax purposes, they can be claimed as a moving expense.
A person moving for post secondary education is also eligible for a moving expense claim if the course load is at least 60 per cent.
However, the expenses for moving to school can only be used against taxable scholarships, so often this claim can’t be made.
That being said, moving for co-op employment or back home for summer employment does qualify the student for making a moving expense claim against that income.
The list of allowable moving expenses is extensive and researching this before making a move may avoid lost opportunities within an expense claim.
To this point, a few often overlooked expenses include the cost of breaking a lease (not including any rental payments), utility disconnections and hookups, changing addresses on legal documents and licenses.
Also, temporary living expenses for a total of 15 days at the old or new location.
And costs to maintain the old home to a maximum of $5,000 if reasonable effort to sell the home can be proven.
Renting the old home disqualifies this claim even If it is listed for sale.
Allowable costs of selling the old home include advertising, legal fees, mortgage penalties, real estate commissions and the GST on these specific costs.
If there is a loss on the sale of the house, this is not an allowable expense.
Costs of purchasing the new home include the applicable expenses noted above. However, if GST is paid on a newly built home, the GST is not an allowable moving expense.
Also not an allowable moving expense, are job interview or house hunting trips. Not even one trip.
Finally, simplicity is offered for travel and meals with the use of the simplified flat rate method to claim these types of expenses which allow 56.5 cents/km and $23/meal.
Choosing not to use the simplified method requires an extensive paper trail of slips.
Good luck with the move, and the new job!
Ron Clarke, owner of JBS Business Services in Trail, provides accounting and tax services.