A Posting Year: What the Move Actually Costs You at Tax Time

The Deduction and Its Three Conditions

Moving expenses are deducted on Form T1-M, which feeds line 21900 of your return. Three conditions come from the Act. The move has to be so that you can work at a new location. Your new home has to be at least 40 kilometres closer to that location than the old one was. And the deduction can't be more than the income you earned at the new location in the year.

The distance. The CRA measures the 40 kilometres by the shortest normal route open to the travelling public, not in a straight line. A posting between units in the same area can fail it, and then there's no claim, whatever the move cost. Both homes normally have to be in Canada. The Act makes an exception for someone who is absent from Canada but still resident here, and a member of the Canadian Forces is deemed resident wherever they're posted.

The income limit. Only pay earned at the new location counts. If you reported for duty late in the year, there may not be enough of it to absorb the whole claim. What you can't use carries forward against income at the same location in a later year. It can't be carried back.

The timing. An expense is deductible once it's paid. A cost of this year's move that you pay next year, such as the fees on a house that sells late, is claimed next year.

What the Act Counts as a Moving Expense

Getting there. Travel for you and your household: vehicle costs, and meals and lodging on the way. The CRA lets you claim vehicle and meal costs by a detailed method, with receipts, or by a simplified method at flat rates it publishes each year.

Your belongings. Packing, movers, storage in transit and insurance, a boat or trailer included.

Temporary living. Meals and lodging near the old home or the new one, for up to 15 days.

The old place. The cost of cancelling a lease. If you owned, the costs of selling: real estate commission, legal fees, advertising, and a mortgage penalty for paying out early.

A house that hasn't sold. Up to $5,000 of mortgage interest, property tax, insurance, heat and utilities on the old home, for the time it sat empty while you made reasonable efforts to sell it. Not while anyone from your household was living in it, and not while it was rented.

The new place. Legal fees and the tax on registering title, but only if you or your spouse sold the old home because of the move.

The small things. Changing your address on legal documents, replacing a driver's licence and vehicle permits, and connecting or disconnecting utilities.

The Act leaves out more than people expect. The CRA's list of what you can't deduct includes house-hunting trips before the move, work done to make the old home easier to sell, a loss on the sale, cleaning or repairing a rental to hand it back, mortgage default insurance, mail forwarding, and replacing things like drapes and carpets. The costs of buying the new home are out as well, apart from those legal fees and the tax on title.

Where the Relocation Program Fits

The Relocation Directive pays from two accounts. The Core Account covers the expenses the CAF treats as essential to a move, and it isn't a fixed amount. The Custom Account is a fixed amount worked out by formula. It tops up some Core benefits and pays for others you choose. Benefits you don't use are forfeited, and once the Custom Account is spent, anything further is yours to pay.

The tax rule is short. An expense the CAF paid on your behalf can't be deducted. An expense it reimbursed can be deducted only if the reimbursement was included in your income. That gives four cases.

Covered, and not taxed. Most of the move. Nothing to deduct, and nothing added to your income.

Covered, taxed, and deductible. The Directive says income tax may apply to some benefits from either account, and the relocation provider's tax information lists which ones. They go through your pay with tax deducted and appear on your T4. Where a taxed benefit paid for something the Act counts as a moving expense, the T1-M deduction takes that income back out. Mortgage interest paid under Temporary Dual Residence Assistance is on the taxable list, and interest on an old home that sat empty and for sale is deductible inside the $5,000 limit.

Covered, taxed, and not deductible. Some taxed benefits pay for things the Act leaves out. Mortgage default insurance and a home inspection on the new house are both on the taxable list, and neither is a moving expense under the Act. The tax on those is a real cost of the move, and the return can't recover it.

Not covered. Whatever you paid yourself because a limit was reached or the Custom Account ran out. If it's on the Act's list, it goes on the T1-M. This is the pile of receipts worth sorting.

Your Province on December 31

Your province of residence for the whole tax year is the one you lived in on December 31, and that's the province whose tax form you complete. Tax came off your pay through the year at the rates of the province you were working in at the time.

So a mid-year move between provinces with different rates leaves a gap in one direction or the other: a balance owing if you moved to a higher-tax province, a refund if you moved to a lower-tax one. Neither has anything to do with how the move itself was handled. Our tax estimator works province by province if you want a rough read before you file.

When a Spouse's Income Stops

A posting often costs the household a second income for months. That changes more on the return than the income line.

The spouse amount. If your spouse's or partner's net income for the year comes in under your basic personal amount, you can claim a credit on the difference. A year with a gap in their work is often the first year it applies.

Transferred credits. If their income is too low to use all of certain credits, the unused part can be transferred to you: tuition, the disability amount, the pension income amount, the age amount, and the caregiver amount for an infirm child under 18.

Child care. Child care expenses are claimed by whichever of you has the lower net income, a nil income included. If the posting changes which of you that is, the claim moves with it.

Benefits. The Canada Child Benefit is recalculated every July from the family's net income for the previous year, so a lower-income posting year raises it from the following July. The moving expense deduction reduces net income too, which counts toward that as well as toward tax.

Their own move. Your spouse relocated as well. If they start work at the new location, the move is an eligible relocation for them, and the CRA lets a couple decide how the deduction is shared. Each expense is deducted once, by one of you, against that person's income at the new location.

What to Keep

Receipts don't go in with the return. You keep them, and the CRA can ask to see them later. For a posting, that means the posting message, the record of what the relocation provider paid and what it treated as taxable, receipts for everything you paid yourself, and a note of the route and distance from each home to the new place of duty.

You complete a separate T1-M for each move. Two postings in a year is two forms.

Our What to Bring checklist covers the rest of the return. If you kept the old house and rented it out, a different set of rules applies to it, and our rental property guide covers those.