It’s the season for moving, so understand the tax breaks

A few years ago, Elaine Walker from Redmire, England, moved to Turkey to be with her new lover – a Turkish DJ 20 years her junior whom she met three weeks earlier while on vacation.

People move for all kinds of reasons, so maybe her story isn't so strange. Except that she abandoned her 15-year-old daughter, leaving her behind in England with the equivalent of about $70 as part of the process.

What about you? Are you thinking of a move? It's moving season here in Canada and thousands are uprooting and moving house.

If you're in this boat, here are a couple of tips: Take your kids with you if they're minors, and make sure you claim all the moving expenses you're entitled to.

On April 5, the Canada Revenue Agency published a new Income Tax Folio S1-F3-C4, which deals with the issue of moving expenses.

Here's what you need to know.

Eligible relocation

Many think that they can claim moving expenses for any type of move. Not so. If you move for personal reasons, you'll be out of luck. Your move has to allow you to be employed, carry on a business or attend a postsecondary school full time. Further, you have to ordinarily reside in the new residence.

This may seem like a strange requirement, but I've met people who have, for example, purchased or rented a new home or apartment closer to work but still own their old home, where the rest of the family remains, and still spend much time at the old residence. "Ordinarily residing" in the new home isn't defined in our tax law, but the Supreme Court has said that "one is 'ordinarily resident' in the place where in the settled routine of his life he regularly, normally and customarily lives."

Both your old and new residences must be located in Canada (unless you're moving somewhere outside of Canada but will remain resident for tax purposes in Canada). Finally, your move has to allow you to be at least 40 kilometres closer to your new work or school location (measured using the shortest normal route available to the travelling public).

Other conditions

You'll be able to claim moving expenses provided they weren't paid for by your employer; they weren't deducted in a prior year; they weren't deducted as some type of other expense (such as child-care expenses); they aren't more than your income for the year from your work, business or school (including awards, grants and prizes) in your new location; and any reimbursement or allowance you received for moving costs is included in your income. Finally, the moving expenses you claim must have been paid by you (although the taxman will generally allow you and your spouse or common-law partner to allocate the expenses in any proportion between you if you both have an eligible relocation, regardless of which spouse paid the expenses).

Expenses to claim

You may be able to deduct: travel for you and your family, transportation and storage of your things, meals and lodging for up to 15 days, lease cancellation costs, revision of legal documents to reflect your address change, replacing driver's licence and vehicle permits, connecting or disconnecting utilities, costs of selling your old home (advertising, legal fees, real estate commissions, mortgage prepayment or discharge fees), legal fees, land transfer taxes, up to $5,000 of costs related to your old home while it was vacant and you were trying to sell it (including interest, property taxes, insurance and utilities). Sorry, but the cost to fix or replace lost or damaged goods in the move isn't deductible. Check out CRA Form T1-M, available online for more details.

Tax ideas

You'll face tax in the province where you're considered resident on Dec. 31 each year. So, if you're moving to a lower-taxed province, you'll want to make that move before year-end if possible. On the flip side, you might want to defer your move until 2017 if you're moving to a higher-taxed province. Also, if you're not able to claim all of your moving expenses in 2016 because your income from your new location is not high enough, you can carry those expenses forward to deduct them in any subsequent year.

Finally, think about hiring your children who are 18 or older to help in the move. That's right, pay them for their time and effort. You'll be able to deduct the amounts you pay them as moving costs if you otherwise meet the criteria. Your kids will have to report that income, but will pay no tax if their income is under the basic personal amount of $11,474 for 2016.

Tim Cestnick, FCPA, FCA, CPA(IL), CFP, TEP, is an author and founder of WaterStreet Family Offices. He can be reached at tim@cestnick.ca.