Moving Expenses: Are They A Tax Deduction Or Not?

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If you experienced a move in 2014, you may be wondering if you can write off the associated moving expenses when you file your tax return. The key is whether the distance between your old home and your new work location is 40 kilometers or greater than the distance between your new home and new work location.

You need to take heed of two technical interpretations on moving expenses The Canada Revenue Agency released this month to see if they apply to your particular situation or not.

The first interpretation related to a situation of a taxpayer completing a full-time employment contract; subsequently, that contract was renewed by the employer. The worker was offered a permanent position in that same occupation, which she accepted. She then moved 40 kilometers closer to the work place. This brings up the question of whether she could write off the moving expenses on her tax return.

It’s important to note that there are some instances where the employer and/or work location remain the same, yet the employee can write off the moving expenses on his/her tax return. It comes down to whether the employee would have been unable to assume the new job responsibilities without moving; if he/she could not, then it’s likely that he/she could write off the moving expenses.

In this specific case, however, the employee could still have assumed the new job responsibilities without moving from her old residence to her new one; thus, she likely cannot write off her moving expenses.

The second interpretation related to a situation involving a taxpayer who still works for the same company, but who accepted a job transfer to another city in Canada. Before he transferred, he, his wife, and their child lived in a leased apartment.

Due to the lease agreement, the lease could not be broken before the end of the period; thus, the taxpayer still had to make payments on the apartment even after he and his family had relocated out of that apartment to their new home.

Via the Tax Act’s definition of moving expenses, if all other conditions are met, “the cost to the taxpayer of cancelling the lease” can be claimed as a deductible expense. However, the Tax Act does not specifically define the phrase, “cancelling the lease.” As a result, the CRA uses the common meaning of the word “cancel” and case law on a case-by-case basis to determine if the cost of cancelling the lease can be written off as a “moving expense.”

Even though the taxpayer had to continue paying for the apartment after he and his family moved out of it, the payments did not cancel the lease before the end of its agreed-upon term. Thus, the CRA would likely rule that those payments cannot be written off as moving expenses on his tax return.

Eric La CaraEric La CaraManaging Partner and Tax Practice manager for Capital Tax in Vancouver and Tokyo. Eric is a U.S. and Japan Personal & Corporate tax specialist with more than 15 years of experience in the area of cross-border structuring and taxation. Eric is charged with developing Capital Tax overall operations and strategic direction using the business and technical skills he has acquired during his professional career in Asia.