Moving can be costly

Moving can be costly, but a generous tax deduction can bring significant relief for those families who plan carefully, says Evelyn Jacks, President of The Knowledge Bureau and author of Essential Tax Facts.

"In some cases, five figure refunds are possible," says Mrs. Jacks, "especially when removal costs and real estate commissions are claimed, however, these claims are often audited and require receipts and documentation."

To qualify, the taxpayer must first show that income is eared at the new location, generally from actively earned sources like salary, wages or self-employment income. In addition, the taxpayer must stop working or operating a business at the old location, and establish a new home where the taxpayer and family will reside.

"Note, certain income sources earned at the new location will not be considered qualifying income for the purposes of claiming moving expenses," says Mrs. Jacks, "and this includes investment income, and employment insurance benefits."

In addition, the new home must be at least 40 km closer to the new work location than the old home. The distance is measured by the shortest normal route open to the travelling public. And, according to Jacks, in the case of students moving to attend full-time courses at a post-secondary school, (or to work as a co-operative student in an industry relating to academic studies) qualifying income against which to claim moving expenses may be the taxable portion of

• scholarships,
• bursaries,
• fellowships,
• research grants or
• other awards (i.e. prizes for achievement).

Most expenses for moving to the new location are eligible and include the following:

• cost of selling the former residence, including real estate commissions, penalties for paying off a mortgage, legal fees, and advertising costs
• costs of keeping a vacant old residence (to a maximum of $5,000) while actively attempting to sell it, including mortgage interest, property taxes, insurance premiums and heat and power
• expenses of purchasing the new home (as long as the old home was owned), including transfer taxes and legal fees
• temporary living expenses (meals and lodging) for up to 15 days
• removal and storage costs including insurance for household effects, costs of moving a boat, trailer, or mobile home
• transportation costs
• costs of meals on route (100% - no 50% restriction)
• cost of cancelling an unexpired lease
• cost of revising legal documents to show the new address, replacing drivers licenses and auto permits, cost of utility connections and disconnections

The following expenses are not deductible:

• expenses to make the former property more saleable
• losses on the sale of the former property
• expenses incurred before the move (such as house hunting or job hunting)
• value of items that could not be moved (plants, frozen foods, paint, cleaning products, ammunition, etc.)
• expenses to clean a rented residence
• replacement costs for items not moved such as tool sheds, firewood,
• drapes, etc.
• mail forwarding costs
• cost of transformers or adaptors for household appliances
• GST on new residence
• expenses that are reimbursed

“Travel expenses may be calculated using a rate per kilometre basis rather than claiming the actual amount spent," says Jacks. "This method does not require receipts to be kept for travel expenses, only a record of the distance traveled during the move, and the rate is calculated based on the province in which the move began."