Moving Expenses: Eligible Deductions and How to Claim
Depending on how far you move, costs associated with relocation can add up quickly. Fortunately, many of the biggest moving expenses can be completely deducted from your Canadian federal tax return, lessening your tax burden for the year and taking some of the stress out of moving. In this guide, we’ll go over everything you need to know about moving expense deductions and how to claim them.
- You can write off moving expenses deductions if they’re incurred to move more than 40km closer to work.
- Moving costs are deductible for employees, self-employed people, and full-time students.
- You have the option of using the simplified or detailed moving expense deduction method.
- Eligible Moving Expenses
- Who Can Claim Moving Expenses?
- Which Form is Used to Claim Moving Expenses?
- How to File Moving Expenses on Taxes
- Expense Tracking and Accounting Made Easy with FreshBooks
- Frequently Asked Questions
Eligible Moving Expenses
The CRA considers moving expenses deductible when they’re related to employment, such as moving for a new job or relocating your business. Understanding the deductible relocation expenses below can help reduce the overall costs of these types of moves:
1. Transportation and Storage Costs
The most common moving costs are transport and storage. You can write off the costs of hiring movers, in-transit storage, packing services, and moving insurance premiums.
2. Travel Expenses
Travel expenses to your new work location are also deductible. This includes meals and accommodations for you and your family, as well as any relevant vehicle expenses, such as fuel.
3. Temporary Living Expenses
If you need temporary accommodations to fill the gap between your new home and your old one, you can deduct up to a 15-day stay for you and your family.
4. Cost Of Cancelling Your Lease
You can also deduct lease cancellation costs. However, you cannot deduct the costs of rent from your taxes, even if it’s for an overlapping month in which the old home is vacant.
5. Incidental Costs Related To Your Move
Relocation expenses include many small, incidental costs, which are deductible. This includes fees for changing your address, replacing your driving license, and paying for utility hook-ups/disconnections.
6. Cost To Maintain Your Old Home When Vacant
If your home is vacant after you move, you can deduct certain expenses as long as you can show a reasonable effort to sell the property. This includes interest, property taxes, insurance premiums, and utilities. The maximum deduction for vacant home costs is $5,000.
7. Cost Of Selling Your Old Home
Costs related to selling a home, like advertising, notary/legal fees, real estate agent commission fees, and mortgage prepayment penalties, can all be deducted after you sell your old home.
8. Cost Of Buying The New Home
Provided you sold your old home because of your move, you can write off costs like notary/legal fees and any taxes besides GST/HST that you paid to transfer or register title on your new home.
Looking for a simpler way to track and manage eligible tax deductions? FreshBooks makes tax preparation a breeze with its all-inclusive accounting software.
Who Can Claim Moving Expenses?
Moving costs can only be claimed in specific circumstances. Your move must be made in order to work a new job or run a business at a new location. The move must place you at least 40 kilometres closer to your new work location. You also need to be a resident of Canada, and both the old and new locations must be considered ordinary residences by the Canada Revenue Agency.
Which Form is Used to Claim Moving Expenses?
You’ll use Form T1-M, Moving Expenses Deduction, to calculate your eligible moving costs. You then claim the total expenses on line 21900 of your T1 tax return. You don’t need to submit Form T1-M, but you must retain it in case the CRA wants support for your claim.
How To File Moving Expenses on Taxes
Filing your eligible moving expenses deduction on your taxes is actually a relatively simple process—here’s how it works:
- Get Form T1-M, Moving Expenses Deduction
- Decide if you’ll use the simplified filing method (using a flat kilometre rate for distance travelled and flat food rate for three meals per day, per person) or the detailed method (itemizing all receipts and actual costs)
- Fill out Form T1-M to calculate your total eligible deductions for moving to the new location
- List your total deduction amount on line 21900 of your T1 tax return, along with net eligible income
- Submit your T1 tax return as usual
- Keep all receipts and legal documents (e.g., your Form T1-M) in case the IRS requests support for your claim
Expense Tracking And Accounting Made Easy With Freshbooks
Looking for a way to keep moving costs and other eligible travel expenses organized? It’s never been easier than with FreshBooks accounting software. With a suite of useful tax tools, including streamlined, efficient expense tracking for moves and any other deductible costs, FreshBooks makes it simple to make your next move and claim your moving expenses with ease. Try FreshBooks free today!
Looking to reduce your tax bill even further this year? Read our full guide on tax write-offs for small businesses in Canada for more information.
FAQs About Moving Expenses
If you’re still curious about claiming a moving expenses deduction on your income taxes this year, read the top frequently asked questions below.
How many years can you carry forward moving expenses?
If your moving costs were more than your total employment or self-employment income earned (including scholarships and research grants) at the new location in that year, all or part of the expenses can be carried forward to future tax years. There is no limit to how many years you can carry forward these expenses.
Can a retired person claim moving expenses?
Moving costs (including travel and property taxes) can only be deducted for the purposes of relocating closer to work or for full-time study. Retirees moving because of preference or to downsize their homes aren’t eligible for tax deductions.
Is it worth claiming moving expenses?
Yes—from vehicle expenses to legal fees, it’s definitely worth claiming your eligible moving costs. Do some estimation and calculation beforehand to determine if you’re better off claiming the simplified, flat rate for your expenses versus itemizing your expenses and claiming the actual costs incurred as a deduction.
Can you claim moving expenses for medical reasons?
If you, your spouse, or an eligible dependant lives with a severe, long-term mobility impairment, you can claim up to $2,000 of moving expenses, tax-deductible, to relocate to a home with improved accessibility or that otherwise allows that person to function better.
About the author
Kristen Slavin is a CPA specializing in accounting, bookkeeping, and tax services for small businesses. In addition to her 16 years experience in the accounting field, she also holds a Master’s Degree in Business Administration. In her spare time, Kristen enjoys camping, hiking, and road tripping with her husband and two children. In 2022 Kristen celebrated opening her own firm; K10 Accounting. Learn more about her services: www.k10accounting.com