Time To Be On The Move Or Too Pricey?

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As if moving from one province to another wasn’t difficult enough, the last thing on most people’s minds is how their family’s relocation will affect their tax return. However, the CRA offers a long list of eligible tax deductions related to moving to help offset the costs.

Last year, the average cost of relocation was about $73,500, a 29% increase from 2015, according to the Canadian Employee Relocation Council. This increase can be attributed to soaring home sale prices, which result in equally steep real estate commissions.

Finding a new home in a more expensive city is a big worry for people considering a move, says Stephen Cryne, president of the Canadian Employee Relocation Council. “That’s a growing issue and it’s a key factor for people who are looking at the quality of lifestyle, particularly if they’ve got families.”

Meet Bryan & his family – they are among the 300,000 Canadians who endure an inter-provincial move each year. He is a freelance journalist, and was able to absorb some of the anxiety by cashing in on Toronto’s pricey housing market to return home to Winnipeg, where house prices are more affordable. “It was a difficult decision but we decided to do it to be close to family,” he said in an interview.

According to Aaron Gillespie, tax partner with KPMG in Hamilton, the most common error people make is not being aware of everything they can claim. Eligible moving expenses include real estate commissions and legal fees, transportation and storage costs, travel expenses including meals, temporary living expenses, utility hookup and disconnections, mortgage interest, property taxes and insurance premiums. Deductions are valid as long as the move takes the employee 40 km closer to their new work location.

Expenses can’t be deducted for items including work done to make your home more salable, any losses from the sale, travel expenses for house-hunting, value of items you left behind, repairs on rented homes, replacement of personal items such drapes and carpets and mail-forwarding. Gillespie added “I think these rules are fairly generous in favour of the taxpayer.”

Moving between provinces can also have income tax consequences. Moving from a low-tax province to one with a higher marginal tax rate can eat away at an employee’s take-home pay. “Very few people think twice about relocating based on these inter-provincial tax differences,” says Lisa Hulet, vice-president business development of a moving company.

Tax differentials are important for international moves, but housing costs and family considerations are bigger issues for inter-provincial relocations, she said. “There are people who get excited about going to Alberta because there’s no sales tax, but I haven’t heard the opposite,” she added.

Self-made moving is growing in popularity with more tools available to help and rising costs of hiring, but relocation specialists urge people to take caution in selecting movers, especially those not associated with a van line.

“While some companies offer complete moving packages, an increasing number are instead offering lump sums,” said Michael Deane, vice president of a relocation service. “Those who want to move largely for personal reasons can save money by doing some of the heavy lifting themselves. Moving yourself in a U-Haul compared to moving with a mover is drastically less expensive,” he added.