These days it’s becoming more commonplace for people to relocate as a result of a new job or transfer (voluntarily or not) by their current or future employer to a different location.
For practical reasons, these people will probably sell their home to move closer to the new workplace. That could be a smart move…
In fact, the real estate broker’s retribution, as well as all moving costs could be fully deductible from the employment income earned at the new workplace!
Federal and provincial tax regulations say that when an individual moves his or her residence within Canada due to a new workplace or because he will open a business in a new location, he can deduct eligible moving expenses, including the real estate broker’s retribution, as long as the new residence (house, rental apartment, condo, etc.) is at least 40 kilometers from the new workplace (whether it’s full-time or part-time work).
We can see that many costs are deductible, even Notary fees and property transfer taxes for the new residence can be deducted if the former residence is sold and a new residence is acquired!
Note that people who have moved in recent years and were eligible for these deductions but failed to claim them, can apply to Revenue Canada and Revenu Québec for retroactive reimbursement, provided not more than 10 years have passed between the moving year and the claim year.
If you paid an expense during one of the years after your move, you can now deduct that cost from your income of the year you paid it.
Your deduction cannot exceed your income at your new workplace. You can carry any unused portion over to the following years or until your new workplace income allows the deduction. Note that the move does not need to have taken place in the same year that your workplace changed, but must have occurred as a result of the workplace change.
John and Nicole live in Sainte-Thérèse, on the north shore of Montreal. After John received a tempting job offer in Brossard on the south shore, they decided to sell their home and move into the new community, close to John’s new workplace.
- Distance between their former residence (Sainte-Thérèse) and the new workplace (Brossard) = 48 km
- Distance between their new residence (Brossard) and the new workplace (Brossard) = 3 km
- Difference: 45 km
Since the difference is 40 kilometres or more, John can deduct all moving expenses, including the real estate broker’s retribution, from the income he earns at his new workplace.
Note: if the difference is less than 40 km, those costs would not be deductible.
Distances are calculated using the shortest route by road. In some situations, referring to Google Maps could be very useful.
According to the tax regulations, eligible moving expenses include:
- Costs relating to the sale of a former residence, including the real estate broker’s retribution, Notary or lawyer fees and any penalties related to the prepayment of a mortgage. However, property improvements to help the sale and any losses incurred from the sale are not eligible.
- Legal fees and property transfer tax related to the purchase of a new residence, provided that the taxpayer or spouse sells or has sold the previous residence because of the move.
- Costs of transporting and storing furniture.
- Costs of meals and temporary accommodations, for a maximum of 15 days, near the old or new residence.
- And numerous other costs…
Costs related to the acquisition of a new residence (other than the fees mentioned above) are not deductible.
Obviously, any costs paid by the employer are not deductible. However, a very advantageous tax strategy can be established between the employer and the employee concerning the costs that the employer should pay first.
Ask your RE/MAX broker for more information on this subject.
Add up all your possible tax deductions and imagine the big tax refund windfall you could receive!