Wednesday, December 02, 2015
Who is eligible to claim moving expenses on their personal tax return?
There are two instances in which a tax payer is eligible to claim moving expenses as a deduction on their personal tax return:
To be eligible for this claim, the new location must be at least 40 kilometers closer to your new job or school. You cannot claim moving expenses if you are maintaining two residences while attending post-secondary school.
What type of income can moving expenses be deducted from?
If you move to a new location for work, then your eligible moving expenses are deducted from your employment or self-employment income earned at your new location of work. Moving expenses incurred for a new job can be carried forward for one year.
If you move to a new location for school, moving expenses can only be deducted from income earned from scholarships, fellowships, bursaries, and research grants. Income received from scholarships must be taxable. A carry forward is available if your total moving expenses are greater than the amount of income earned from scholarships, fellowships, bursaries and research grants. In this situation, the moving expenses will carry forward and be used against future income from scholarships, fellowships, bursaries, and research grants.
What expenses are eligible to claim?
The following are some of the expenses eligible for the moving expense claim:
1. Transportation & storage costs – These include costs for storing and hauling household items, as well as boats, trailers and other items. Some examples of costs you may incur include packing, hauling, movers, and insurance.
2. Travel expenses – These costs include meals, vehicle expenses and accommodation required to move you and your family to the new location. Vehicle expenses are costs such as fuel, oil, tires, license fees, insurance, repairs, and maintenance. There are two ways to calculate travel expenses, the detailed method or the simplified method.
The detailed method consists of keeping all of the receipts received for meal and vehicle expenses and claiming the total of these receipts. It is important to keep all receipts as CRA may ask to see them to verify the total expense claim.
The simplified method uses a flat rate for meals and a kilometer rate for vehicle expenses. The flat rate for meals is equivalent to $17/meal to a maximum of $51/day, per person. For vehicle expenses, the allowable kilometer rate is $0.455 for Alberta, and $0.475 for Saskatchewan for 2014. These rates are multiplied by the number of kilometers driven from the old location to the new location. You can claim multiple trips using the kilometer rate as long as the number of trips is reasonable. Using the simplified method for vehicle expenses requires the use of a mileage log as the CRA may want to see proof of the number of kilometers.
3. Temporary living expenses – These costs include temporary accommodation for a maximum of 15 days for you and your family while you move from your old location to your new location. You can also include meals as temporary living expenses.
4. Costs of cancelling a lease – These are the costs incurred to cancel a lease early. These costs DO NOT include rental payments in which the residence was occupied.
5. Incidental costs – These are costs such as utility hook ups and disconnections, costs for changing your address on legal documents, and replacing driver’s licenses for your new location.
6. Costs to maintain your old location – These are costs that are incurred for a residence owned by you, that you are actively trying to sell, but has been vacant since you moved. These costs include interest, property taxes, insurance premiums and utilities. The maximum claim for these expenses is $5,000.
7. Costs of selling your old residence – These costs include advertising, legal fees, real estate commissions and mortgage penalties incurred for paying off a mortgage before it has become due.
8. Costs of purchasing your new residence – These costs include legal fees as well as any taxes paid (other than GST/HST or property taxes) for the transfer of title to the new residence.
Reimbursements of moving expenses:
Any reimbursements received for moving expenses must be deducted from the total moving expense claim. This includes any reimbursements received from an employer for moving to the new location.
Be sure to bring in your documentation to support your moving expense claim this tax season to ensure this deduction gets picked up on your return. Feel free to contact us if you have any additional questions regarding the moving expense deduction.