Spring is a busy time, especially this year in Kelowna, with real estate sales. Now that summer is here, kids are out of school, lives are being packed up and all of those spring buyers are making the move into their new homes. If you’re one of the many moving to Kelowna or the surrounding area, you’ve likely racked up quite the pile of moving receipts. You may have questions for a Kelowna accountant in the near future about whether or not you can claim a deduction for these recent expenses and I’m here to clear up the confusion.
Many people moving to Kelowna are aware that a tax claim of some kind can be made in respect to expenses, but only a few discuss them with an accountant and are not aware that these tax claims can be made only in certain circumstances.
As your local Kelowna accountant, we can determine what can and cannot be claimed, making your life a whole lot easier come tax time.
Many people moving to Kelowna have done so by choice, but that doesn’t make the process of moving any less stressful or costly.
An accountant will start with an assessment of the reason for the move. If your move to Kelowna was to bring you at least 40 kilometers closer to your new work location, eligible moving expenses will be deductible.
You can claim a deduction for eligible costs incurred, but that deduction can be made only from income earned at the new place of employment. So, if you moved to Kelowna in July, you can only deduct eligible moving costs from income earned between the date of the move and December 31st of that year.
Moving is never cheap, especially if the move has been a long distance one. The extra costs incurred may be greater than the income earned. In those cases, a Kelowna accountant can determine if any of those moving expenses can carry forward and be deducted from the income earned at the new place of employment in the following taxation year.
The following are moving expenses that The Canada Revenue Agency (CRA) WILL allow a deduction to be claimed:
- Transportation and storage costs— You can claim transportation and storage costs for household items, boats, and trailers. These costs would include packing, hauling, movers, in-transit storage, and insurance.
- Temporary living expenses— You can claim any costs incurred for meals and temporary accommodation near the old or the new residence. All members of the household are covered to a maximum of 15 days.
- The cost of breaking a lease— It is not possible to claim any rental payments for any period of time prior to cancelling a lease but you may claim the cost of cancelling the lease.
- Costs due to address change— The cost to replace legal documents, driver’s licenses and non-commercial vehicle permits due to the new address change are permitted. This includes costs of utility hook-ups and disconnections.
- Costs to maintain the vacant old residence— You can claim up to $5,000 in costs for interest, property taxes, insurance premiums, and the cost of heating and utility expenses paid to maintain the vacant residence while efforts were being made to sell the property. The costs must have been incurred when the old residence was vacant and not occupied by the taxpayer or any of the household members. Claims cannot be made for any period of time the residence was rented to someone else.
- Costs to sell the old residence — Advertising costs, notary or legal fees, real estate commissions, and mortgage penalties can all be claimed as deductions.
The following are moving expenses that the CRA WILL NOT allow a deduction to be claimed:
- expenses for renovations to make the old home more saleable;
- mortgage default insurance;
- travel costs due to house-hunting trips prior to the move;
- the value of items movers refused to take (plants, frozen food, ammunition, paint, and cleaning products);
- costs incurred during job hunting in another city;
- expenses to clean or repair a rented residence;
- costs to replace personal-use items such as tool sheds, window coverings, and carpets;
- mail-forwarding costs;
- costs of transformers or adaptors for any household appliances;
- costs incurred in the sale of the former residence if you choose to delay the sale for investment purposes or until the real estate market improved; and
- any loss from the sale of the former home.
You’ll more than likely drive yourself and your family to the new home. Travel costs in doing so qualify for the moving expense deduction. The term “travel costs” is quite broad but includes vehicle expenses and the cost of meals for you and your family.
You may choose to keep every receipt you’ve picked up along the trip and claim the total amount paid. Or, if just thinking about calculating those costs gives you a headache, the CRA has a simplified method. They allow vehicle and meal expenses to be claimed as a flat rate for each.
The vehicle expense claim is on a per-kilometre rate with a specific rate per province, using the rate in the originating province.
The meal expense rate is the same regardless of the province in which the move began.
A move to Kelowna is positive and exciting! Yet there’s no escaping the fact that every move is disruptive, stressful, and costly.
The tax system can’t alleviate any of the stress that comes with relocating but speaking to a Kelowna accountant and getting the facts right away will drastically lessen the stress during tax season.
You are entitled to claim a deduction because of your recent relocation and as your trusted Kelowna accountant, I will assess your moving expenses and get the eligible deductions owed to you. Let’s put your plan together now so there are no unwanted surprises at tax time. Contact me here: email@example.com