Court backs CRA in rejecting couple’s $54,000 moving expense claim

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Summer time is a well-liked time for Canadians to maneuver, particularly for households with youngsters who hope to have their kids start the tutorial 12 months of their new faculty by the start of September. For eligible people, the prices of shifting could be considerably defrayed by claiming a tax deduction on your shifting bills, however provided that you meet sure situations.

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A latest case handled a pair’s shifting bills and whether or not they have been tax deductible, however earlier than leaping into the small print of the case, let’s start with a fast refresher of the shifting expense guidelines.

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Underneath the Earnings Tax Act, you’ll be able to write off your shifting bills if you happen to moved for work, to run a enterprise or to be a full-time scholar. The bills could be deducted from the employment or self-employment earnings you earned at your new work location. To qualify, your new residence have to be a minimum of 40 kilometres nearer to your new work or faculty.

Assuming you qualify, you’ll be able to declare cheap shifting bills that you just paid for shifting your self, your loved ones, in addition to any home items. Eligible shifting bills embrace the prices of packing, hauling, movers, in-transit storage and insurance coverage on your home items, in addition to journey bills.

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Journey bills can embrace: motorized vehicle bills, meals and in a single day lodging to move you and your loved ones to your new residence. Short-term dwelling bills for as much as a most of 15 days for meals, and momentary lodging close to the previous, in addition to the brand new residence, are additionally tax deductible.

Except for these apparent bills related to the bodily transfer, eligible bills can even embrace numerous ancillary prices resembling the price of cancelling the lease on your previous residence in addition to different incidental prices associated to your transfer, resembling charges paid to alter your tackle on authorized paperwork, substitute your driver’s licence and utility hook-ups and disconnections for both residence.

Prices related to promoting your previous residence are additionally tax deductible, together with promoting, notary or authorized charges, actual property commissions and any mortgage penalty related to paying off your mortgage earlier than maturity. Equally, prices related to shopping for your new residence, together with authorized or notary charges, in addition to any switch taxes paid for the switch or registration of title to your new residence, are additionally tax deductible.

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Given all these potential shifting prices, it’s not shocking that the price of a transfer can add as much as large bucks, making a tax deduction, if relevant, very engaging. Think about the latest case of a Quebec couple who tried to deduct practically $54,000 of complete shifting bills between the 2 of them on their 2019 tax returns.

The couple labored on the similar Montreal regulation agency. Their former residence, outdoors of Montreal, was near one of many partner’s kids from a previous relationship, and each taxpayers had moved to that location in 2013 or 2014 for private causes, whereas already working on the regulation workplace. In 2019, they then moved to Montreal to cut back commuting time after the youngest of the partner’s kids accomplished highschool. It’s this transfer, in 2019, that triggered them to incur the substantial shifting bills, which they tried to deduct on their 2019 tax returns.

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The Canada Income Company denied every of the taxpayer’s claims for shifting bills, and the couple took the matter to Tax Courtroom. The problem earlier than the choose was whether or not their transfer constituted an “eligible relocation.” An eligible relocation is particularly outlined within the Tax Act as a transfer that’s made in an effort to allow a taxpayer to hold on enterprise or take up employment at a spot in Canada, known as a “new work location,” offered the 40 km distance check is met.

The couple argued that they moved to Montreal for “skilled causes” and that they meet the legislative situations to assert shifting bills because the Earnings Tax Act doesn’t specify a time restrict inside which the taxpayer should transfer to be entitled to the deduction.

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Whereas it’s not disputed that the couple had a former residence outdoors of Montreal, and a brand new residence in Montreal that was 40 km nearer to the couple’s regulation agency, the priority the CRA had was that there was no “new work location” in 2019, the 12 months the shifting bills have been incurred and claimed. The couple continued to work on the similar regulation agency as they did earlier than the transfer.

The CRA argued that in an effort to be entitled to the shifting expense deduction, it’s important that there be a brand new work location and that it have to be geographically totally different. The CRA famous that regardless of numerous legislative amendments to the shifting expense deduction over time, Parliament by no means eliminated the brand new work location requirement from the act. Within the case at hand, the CRA argued that the couple merely doesn’t have a brand new work location associated to the explanation behind their transfer, and subsequently the taxpayers weren’t entitled to the shifting expense deduction.

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The choose acknowledged that prior case regulation has lengthy acknowledged that the Earnings Tax Act doesn’t present for any time restrict inside which a transfer in residences should happen after the beginning of employment on the new work location so as to have the ability to declare shifting bills. However this merely implies that a taxpayer could take a while earlier than shifting to be nearer to his new work location. It doesn’t imply {that a} taxpayer can transfer away from their workplace after which transfer nearer to it a number of years later, as was the case with this couple.

The choose summarized that in an effort to declare the deduction, a taxpayer should reveal that they’ve a brand new work location. Since this couple continued to work on the similar regulation agency as earlier than their transfer to Montreal, they merely didn’t have a brand new work location and thus their shifting bills weren’t tax deductible.

Jamie Golombek, CPA, CA, CFP, CLU, TEP is the managing director, Tax & Property Planning, with CIBC Personal Wealth in Toronto. Jamie.Golombek@cibc.com

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