Want a $5,000 tax deduction?
Move 40 kilometres closer to work or school and you could be eligible for some serious deductions.
No one likes to move. The packing, the lifting, the loading and the driving, it’s a chore that can stress even the biggest Zen-master. But if you were put in a position where you had to move last year, you could be eligible for some substantial savings.
That’s because Canadian residents can deduct almost every expense associated with moving, and these deductions aren’t limited to your transportation and storage costs. Also on that list of eligible deductions are the following:
- the cost of selling your old home and purchasing your new home (including real estate commissions, advertising, legal fees and mortgage penalty associated with selling your old home or the cost of cancelling a lease on your old residence)
- travelling expenses, such as fuel and maintenance for your car
- transportation and storage costs, including insurance, for household effects
- up to 15 days of costs associated with meals and temporary accommodation (while travelling to your new home)
- the cost of revising legal documents, such as driver’s license or automobile permits as well as utility hook-ups and disconnections
- and housing costs, such as mortgage interest, property taxes, insurance premiums and costs for utilities in a potentially vacant old home.
This tax deduction is so lucrative because most of these expenses can be claimed dollar for dollar (unless using the simplified method, as outlined by the Canada Revenue Agency). And keep in mind that not all members of your household have to travel together or at the same time.
So let’s see how this would play out for Neal, a friend who packed up his life in Toronto last November after getting married and taking a job in Vancouver:
- Breaking his apartment lease cost Neal $1,100.
- Meals while driving from Toronto to Vancouver, a four day trip. The simplified deduction allows you to claim $51 per day for meals per person. You can also claim, dollar for dollar, the cost of meals—but keep the receipts. Total claimed: $204.
- Gas from Toronto to Vancouver was (approximately) $600.
- Maintenance check-up, in Toronto, with oil change and tire alignment at a cost of $250.
- He can also claim the 4,350 kilometres he drove from Toronto to Vancouver at a rate of $0.55/km. While each province of origin offers a different mileage rate (the lowest rate in Saskatchewan with $0.46/km and the highest is the Yukon with $0.60/km. Click here to figure out your mileage expense based on your province of origin). For Neal, he could claim: $2,392.50.
- Three nights accommodation in motels: $307.05
- Disconnect cable, phone, utility and wireless in Toronto: $25
- Reconnect cable, phone, utility and wireless in Vancouver: $525
- Changing all legal documents (drivers license etc.): $100
- Transportation and storage costs for all personal effects: $3,000
For Neal, the $8,504 cost of moving was a direct tax deduction off his 2010 income. Now, if he had bought or sold a home he could have also added in those costs—costs that can easily exceed $25,000. These are significant deductions.
Of course, there are restrictions. You must be a Canadian citizen and make sure you keep all your receipts (although, you don’t have to submit these receipts to the CRA). Also, those on Employment Income (EI), pension income or living on investment income cannot claim the deductions. And don’t double-dip. If your employer or school helped pay for moving costs you need to include this as part of your annual income, in order to claim the additional moving expenses as a tax deduction.
Still, if you moved last year or plan on moving, then it’s worth your while to open a map and calculate how much closer you’ll be to work or school—if your 40 kilometres closer, it could really pay off.