How Much Do You Get Back in Taxes for Moving Expenses in Canada?

You may want to move across Canada for multiple reasons: new job, better location, education purposes, etc. But did you know that in most cases, Canadian residents are offered moving expenses reduction? You can return a part of your outgoings by claiming your tax back or in other ways. Keep reading to explore all options and limitations to return a part of your moving expenses.

Who is Eligible to Claim Moving Expenses?

Most Canadian citizens can claim a part of moving expenses by meeting the government requirements. This includes several eligible categories:

• Employed residents of Canada. If you moved to a new place to work here, and you could not work by living in a previous area, you can deduct moving expenses. 
• Self-employed citizens. Moving to run a business in a new area is also a reason to claim a part of expenses. 
• Students of local universities. As a student, you can claim a part of the expenses out of your scholarship.

You can also complete tests by the government to see if your situation suits the demands.

What Amount Can be Deducted?

Canadians can receive 100% compensation for their moving outgoings, but there are maximum caps for different expense categories. For instance, you can deduct a part of the expenses for maintaining your vacant house, but not more than 5,000 CAD. The labor mobility dedication for tradespeople is capped at 4,000 CAD per year. All other costs have no maximum limitations.

You should know another rule. If your employer provided you with a moving allowance, you have to subtract this sum from moving expenses. For example, if you’ve spent 5,000 CAD and received 3,000 CAD from your employer, you can claim only the remaining 2,000 CAD.

Types of Moving Expenses You Can Claim

Relocation is quite stressful and involves multiple actions: packing, transportation, long distance moving company costs, renovation, food, and accommodation while you don’t own any property, etc. Luckily, most of them fall under the category of “moving expenses.” According to the state, you can deduct the costs of the following outgoings:

As for non-included categories, you CANNOT claim the following:

• renovation in your old accommodation before it was sold;
• period when your old home was rented;
• losses from selling the home at a cheaper price;
• traveling coast, associated with the house for sale preparation;
• travel expenses for finding a new home.

Shortly, you can claim costs spent on moving but not on preparation for this process.

How Tax Savings Are Calculated?

Note that you can receive a part of taxes paid out of your salary at a new workplace. All other taxes (old workplace, another business, passive income) are not eligible. If you have already paid taxes at your new job/business, use Form T1-M “Moving Expenses Deduction.” The government portal gives a ready-made PDF to fill.

After this, the state analyses your request. In case you’re eligible, a part of the taxes you’ve already paid will be turned back to you. You should understand that this program doesn’t imply direct reimbursement – you won’t receive money from the air. You can only return part of the taxes paid by you at work.

The sum you receive cannot be higher than your income at a new job. Here’s an example: you’ve spent 10,000 CAD during relocation, and all of these costs are eligible for deduction. After moving, you opened a business that brought an 8,000 CAD revenue at the moment. Thus, you’ll receive an 8,000 CAD deduction. The other 2,000 CAD will be repaid the next year – of course, if you continue working and paying taxes at this place. If your income is already higher than the deduction cost (for example, you’ve earned 12,000 CAD), you will receive a 100% education in one payment.

If you run a business at two locations (an old and new one, or two new places), your dedication will be capped at the revenue from a single place – the one you’ve moved to.

Common Mistakes and Tips

The Government of Canada has released an article, where experts explained common mistakes and gave tips on using tax deduction programs. Based on the material, one can  guess the following mistakes:

• You don’t count the distance between your old and new home. You need to move at least 40 km closer to your new workplace.
• You claim non-eligible expenses. You cannot claim money for house maintenance if it was rented; expenses, covered by your employer, cannot be claimed as well.
• You’re not eligible. Only employed, self-employed people, or students are suited for this program.

To avoid mistakes, read the program rules carefully.

Key Takeaways

Here’s what you should know:

• Moving expenses dedication turns back a part of paid fees to compensate for your relocation costs.
• Eligible residents are employed or self-employed people or students.
• You can claim taxes from salary, earned at your new workplace.
• If your employer sponsored the relocation, you cannot claim this money from the state.
• Moving expenses include transportation, package, and storing costs, outgoings for food and rent while you move, and documentation.
• To apply, use the T1-M form on the official website of the government of Canada.