23 April 2013 External T.I. 2013-0476171E5 - Moving expenses - spouse's eligible expenses

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: Can a taxpayer's spouse claim eligible moving expenses that were incurred by the taxpayer prior to the marriage (eligible relocation and marriage were in the same year)?

Position: In this case, yes.

Reasons: Where a taxpayer has an eligible relocation as a result of a change in residence, he/she would generally only be able to deduct the amount of eligible moving expenses that he/she actually paid. However, provided any expense otherwise complies with the requirements of section 62 of the Income Tax Act (for instance, the amount of any expense is reduced by the amount of any reimbursement or allowance received by either taxpayer in respect of such expense and such amount is only claimed as a deduction once), the CRA generally will allow some flexibility in allowing the taxpayer's spouse or common-law partner to claim the moving expense deduction or allow both individuals to decide how the deduction will be shared. This would be the case even if the individuals were not spouses or common-law partners, as those terms are defined in the Income Tax Act, at the time of the move as long as they were spouses or common-law partners at any time in the calendar year in which the move occurred.

XXXXXXXXXX
2013-047617
P. Waugh

April 23, 2013

Dear XXXXXXXXXX,

Re: Moving Expenses

We are writing in response to your letter dated January 22, 2013, concerning the deduction of moving expenses. More specifically, you have enquired whether an individual can claim eligible moving expenses relating to the sale of a residence owned by his or her spouse.

In the situation you described, an individual was living with his girlfriend in a home owned by her (the "old residence"). The old residence was sold and the individual and his girlfriend moved to a new residence in another province where he obtained new employment. Subsequent to the move, the individual and his girlfriend married and will be filing their tax returns as married. At the end of the year, the girlfriend had not found new employment. All events occurred in the same calendar year.

Our Comments

Subject to certain conditions and limits, a taxpayer is allowed to deduct from income, amounts paid by the taxpayer as or on account of moving expenses incurred in respect of an "eligible relocation". Assuming there is an "eligible relocation", in order for a particular moving expense to be deductible by a taxpayer, the amount must actually be paid by that taxpayer. For instance, if eligible moving expenses are paid by anyone other than the taxpayer, including the taxpayer's employer, such amounts would not be deductible. If an employer pays or reimburses an employee for only part of the moving expenses, the remainder is deductible by the employee to the extent that it constitutes an eligible moving expense.

Eligible moving expenses must be claimed in the year that they are paid; however, the amount deducted cannot be more than the income earned at the new work location. Any excess may be carried forward and deducted in a year subsequent to the year of the move to the extent of income earned at the new work location. Eligible expenses paid in a year following the year of the move cannot be carried back to a previous year.

Where a taxpayer has an eligible relocation as a result of a change in residence, he/she would generally only be able to deduct the amount of eligible moving expenses that he/she actually paid. However, provided any expense otherwise complies with the requirements of section 62 of the Income Tax Act (for instance, the amount of any expense is reduced by the amount of any reimbursement or allowance received by either taxpayer in respect of such expense and such amount is only claimed as a deduction once), the CRA generally will allow some flexibility in allowing the taxpayer's spouse or common-law partner to claim the moving expense deduction or allow both individuals to decide how the deduction will be shared. This would be the case even if the individuals were not spouses or common-law partners, as those terms are defined in the Income Tax Act, at the time of the move as long as they were spouses or common-law partners at any time in the calendar year in which the move occurred.

For more information on what moving expenses a taxpayer is allowed to deduct in connection with an eligible relocation, including limitations on how much the taxpayer can deduct from income in a particular year with respect to the relocation, please refer to Interpretation Bulletin IT-178R3 (Consolidated), Moving Expenses, and Form T1-M, Moving Expenses Deduction.

We trust these comments will be of assistance.

Nerill Thomas-Wilkinson, CPA, CA
Manager
for Director
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch