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The
$$$ Maker
Report
Bi-Monthly Investment Newsletter by Karl
Jung, CLU NOV/DEC,
2006 |
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Gibsons Office: (604) 886-2691 |
Cellular: (604) 760-9899
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Fax:
(604) 886-3014
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90 Monroe Road, Gibsons, BC V0N 1V6 |
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e-mail:
kjung@dccnet.com
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Making Your Moving Expenses Tax Deductible
Planning to relocate due to a new job offer, business
transfer or to start your own business? How about to attend college or
university for a post-secondary education? These moves may allow you to deduct
some of the moving expenses associated with the relocation, as long as you
moved at least 40 kilometers closer to the new location.
What expenses are included for this tax deduction?
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Travel
expenses including those for your vehicle, airplane tickets, ferry fares, meals
and accommodations for you and your family
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Transportation
and storage costs associated with moving your personal effects
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Expenses for
up to 15 days for food and temporary accommodation
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Penalties to
cancel an old lease
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Legal fees
associated with buying and selling of your old and new properties
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Advertising,
real estate commissions and mortgage penalties associated with the sale of the
original property
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Miscellaneous
expenses such as new stationary, replacing driver’s licenses, vehicle ownership
papers and utility hookups
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Up to $5,000 to
maintain a vacant home including utility fees, property taxes, mortgage
interest and insurance
How much can be deducted in a given year?
The total amount deductible is limited to the amount of income
generated in the new location, therefore the expenses deducted in a given year
cannot exceed the income (business or employment) earned in your new location.
Any excess expenses can be carried forward to the next tax year;
however it must be applied to actual employment income earned from the new
location.
What about moving expenses for
students?
Yes, deductions for students apply as long as the student is enrolled
full time at the post-secondary level, and it is not restricted to Canadian
schools. The 40 kilometer rule is also applicable.
The deductions can only be offset against scholarships, bursaries,
prizes and research grants that are reported on the tax return. The expenses
can be associated with a move for a summer job or work semester.
If the deduction exceeds income in a given year it can be carried
forward to another tax year.
What about employer-assisted moves?
As long as the financial assistance is declared by the employee as a
taxable benefit, the same tax-deductible rules apply. Generally, CRA allows
specific smaller sums to move an employee as a non-taxable benefit. In that
case, the employer deducts the amount as a business expense in that given year.
An employee and an employer cannot deduct the same expenses.
Certain payments such as lump sum compensation, subsidy for mortgage
interest, or reimbursement for a real estate loss on the original residence
must be declared as a taxable benefit.
Low interest or even interest-free loans must also be included in the
employee’s income according to CRA’s prescribed interest rate, which changes
quarterly. A home relocation loan under $25,000 (repayable within 5 years)
would not be construed as an interest benefit.
As with any financial transaction, take care to think out the tax
implications before making the move. With proper planning some moving expenses
can be paid by the employer without it being a taxable benefit to the employer
relocating. The balance can be deducted by the employee within certain
parameters.
If in doubt contact your accountant
OR go to CRA’s website http://www.cra-arc.gc.ca/tax/individuals/topics/income-tax/return/completing/deductions/lines206-236/219/menu-e.html
. CRA also provides a printed pamphlet
– IT178R3 – Consolidated Moving Expenses.
Other articles
worth checking out this month:
Keep the Seniors Working - An article dealing with some of the reasons why our current pension arrangements should be changed
Back to a list of The $$$ Maker Report and related articles