Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Assistance in making a residency determination. Whether various expenses qualify as moving expenses under section 62 of the Act.
Position: It is a question of fact.
Reasons: See response.
Author: Underhill, Cynthia
Section: 62, 62(3)(a), (b), (c), (e)
January 26, 2015
Re: Provincial residency and moving expenses
We are writing in response to your letter of September 15, 2014, wherein you asked about your provincial residency status and the deductibility of certain expenses that you incurred when you moved from XXXXXXXXXX (Province A) to XXXXXXXXXX (Province B).
In the situation described, you and members of your household relocated, at the end of Year 1, from Province A to an apartment (new residence) located in Province B. You relocated to seek employment and initially accepted a short-term employment contract (Job A) at the start of Year 2. At the start of Year 3, you accepted a permanent position (Job B) with another employer near your new residence. Prior to the move, you and members of your household lived in a house owned by your parents (old residence). Around the middle of Year 3, you took an unpaid leave of absence from Job B to travel back to Province A to pack and sell your household belongings and to finalize the sale your parent’s house.
You have asked about your provincial residency status during the three years and whether various expenses incurred in Year 3 qualify as moving expenses under subsection 62(3) of the Income Tax Act (Act).
This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R6, Advance Income Tax Rulings and Technical Interpretations.
The determination of provincial residency in Canada is a question of fact. Although the Canada Revenue Agency (CRA) tries to meet the needs of all taxpayers and their advisors, the Canadian tax system relies on self-assessment because it is not possible to review the facts of every taxpayer's situation. As such, the CRA does not provide provincial residency determinations except in the course of a CRA-selected audit, which does not appear to be the case in your situation.
Income Tax Folio S5-F1-C1: Determining an Individual’s Residence Status provides guidance to taxpayers in order to assist in making residency determinations. For further information, go to www.cra-arc.gc.ca/tx/tchncl/ncmtx/fls/s5/f1/s5-f1-c1-eng.html.
Generally, section 62 of the Act provides that eligible moving expenses may be claimed by a taxpayer when the reason for the residential move is to begin employment either before or after the move and the new residence is at least 40 kilometers closer to the new work location than the old residence (eligible relocation). It is always a question of fact whether or not a move is an eligible relocation.
If the move is an eligible relocation, subsection 62(3) of the Act lists expenses that qualify as eligible moving expenses. The following expenses are relevant to your enquiry:
* Transportation and storage costs (such as packing, hauling, movers, in-transit storage, and insurance) for household effects, including items such as boats and trailers;
* Travel expenses, including reasonable vehicle expenses, meals, and accommodation, to move the taxpayer and members of the taxpayer’s household to the new residence;
* Temporary living expenses for up to a maximum of 15 days for meals and temporary accommodation near the old and the new residence for the taxpayer and members of the taxpayer’s household;
* Cost of selling the taxpayer’s old residence, including advertising, notary or legal fees, real estate commission, and mortgage penalty when the mortgage is paid off before maturity.
Generally, the particular moving expense must be incurred and paid by the taxpayer to be deductible under section 62 of the Act. For example, if eligible moving expenses are incurred or paid by the taxpayer's parents, such amounts would not be deductible. Based on the information provided, the selling costs in respect of the sale of your parent’s house are likely not eligible moving expenses for you under paragraph 62(3)(e) of the Act because the costs were not incurred by you. In other words, a taxpayer may generally deduct selling costs for the old residence only where he or she was the owner of the old residence.
You have also asked if you can deduct the value of unpaid wages arising because of your leave of absence. In this case, the value of the unpaid wages does not appear to be incurred “in the course of moving” and is not an “amount paid” by you, therefore it is not deductible as a moving expense under section 62 of the Act.
Eligible moving expenses must be deducted in the year that they are paid, however, the amount deducted cannot be more than the total of all employment income earned at the new work location. That is, eligible moving expenses may be deducted against the employment income earned from more than one job at a new work location Any excess may be carried forward and deducted in a following year to the extent of employment income earned at the new work location in that following year. Eligible moving expenses paid in a year cannot be carried back to a previous year.
For more information on what moving expenses a taxpayer is allowed to deduct from employment income, including limits on how much the taxpayer can deduct in a particular year, please refer to Form T1-M, Moving Expenses Deduction, or go to www.cra.gc.ca/moving and select the topic “Moving expenses.”
We trust these comments will be of assistance.
Nerill Thomas-Wilkinson, CPA, CA
Business and Employment Income Section
Business and Employment Division
Income Tax Rulings Directorate
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