25 July 2022 External T.I. 2020-0845311E5 - Moving 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: Whether the costs for long term storage and transporting household goods are eligible moving expenses under the Act in a particular situation.

Position: In this situation, no.

Reasons: Under subsection 62(3) of the Income Tax Act (Act), deductible moving expenses include any expense incurred as or on account of "the cost to the taxpayer of transporting or storing household effects in the course of moving from the old residence to the new residence." In this case, the long term storage costs are not incurred “in the course of moving” and are therefore, not deductible as a moving expense under subsection 62(1) of the Act.

XXXXXXXXXX						2020-084531
C. Underhill

July 25, 2022

Dear XXXXXXXXXX:

Re: Moving expenses

We are writing in response to your correspondence dated March 11, 2020, regarding the deductibility of moving expenses under section 62 of the Income Tax Act (the Act).

We understand that you moved more than 40 kilometres in 2016 to attend a University on a full-time basis. Before your move, you placed your household goods in storage in the city near your old residence because you planned to return and work near your old residence. You did not obtain part-time employment while attending the University at your new residence. After completing your degree, you continued to reside and obtained employment near your new residence. In 2019, you travelled back to the city near your old residence to coordinate moving your household goods to your new residence. You ask whether the storage and transportation costs you incurred are deductible.

Our comments:

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 70-6R12, Advance Income Tax Rulings and Technical Interpretations.

Section 62 of the Act permits an individual to deduct certain moving expenses that the individual paid in respect of an “eligible relocation”.

Paragraphs 4.3 to 4.6 of Income Tax Folio S1-F3-C4, Moving Expenses (the Folio), discuss the meaning of the term “eligible relocation”. Paragraph 4.3 of the Folio discusses all of the conditions that must be met for a move to qualify as an eligible relocation of an employee. Paragraph 4.4 of the Folio states that an “eligible relocation” of a student is a move where all of the following conditions are met:

• it occurs to allow the student to be in full-time attendance enrolled in a program at a post-secondary level at a location of a university, college or other educational institution (referred to as the new work location) whether in Canada or elsewhere;
• before the move, the student ordinarily resided at a residence (referred to as the old residence) and after the move, ordinarily resided at a residence (referred to as the new residence);
• the old residence and the new residence, or one of these residences, are in Canada unless the student is absent from Canada, but resident in Canada; and
• the move allows the student to be at least 40 kilometres closer to the educational institution. As indicated in paragraph 4.3(d), the distance of 40 kilometres is measured using the shortest normal route available to the travelling public.

When an individual moves to study as a full-time student in a program at a post-secondary level at a university, college or other educational institution, moving expenses that are eligible under subsection 62(3) can only be deducted from income earned from scholarships, fellowships, bursaries, research grant income, certain prizes, etc., that an individual reports as income for the year. Similarly, when a student moves to obtain employment, the Act only allows the qualifying moving expenses to be deducted from employment income earned at the new location.

Paragraph 4.22 of the Folio discusses moving expenses under subsection 62(3) of the Act and states that the moving expenses which are eligible include expenses incurred as, or on account of :

“b) the cost of transporting and storing household effects (including items such as boats and trailers) in the process of moving from the old residence to the new residence;” [Emphasis added]

The storage costs must be incurred in the course of moving the household goods from the old residence to the new residence. Therefore, if long term storage costs are incurred in the process of moving they would be eligible providing all of the other requirements in section 62 of the Act are met.

Transportation costs for moving household goods and effects may qualify as eligible moving expenses when there is an eligible relocation. It is a question of fact whether or not a move is an eligible relocation.

The purpose of the move is a key factor in establishing the appropriate tax treatment of the moving expenses under section 62 of the Act. Where the facts demonstrate that a dual-purpose relocation occurred (e.g., the reason for the move was for full-time attendance at a post-secondary educational institution and to obtain employment while attending school), the student would be permitted to deduct eligible moving expenses from employment income earned at the new location and against income from scholarships, bursaries, etc. However, the same moving expenses cannot be deducted against each source of income.

Where the facts demonstrate that an individual did not move after a post-secondary school year to obtain employment, the individual would not be permitted to deduct eligible moving expenses from employment income earned at the new work location, as all the required conditions of an eligible relocation are not met. The definition of an eligible relocation requires that the relocation occur to enable the individual to be employed at a new work location in Canada.

Based on the facts you provided in your letter, it is unlikely that your move in 2019 meets the definition of an eligible relocation.

For more information about eligible moving expenses see paragraph 4.22 of the Folio, Form T1-M, Information About Moving Expenses and the Canada Revenue Agency’s webpage titled, Can you claim moving expenses? You can find a Folio, Guide, or webpage online by going to Canada.ca and typing the name of the Folio, Guide, or webpage into the search toolbar.

We trust that these comments will be of assistance to you.

Yours truly,

Lita Krantz, CPA, CA
Manager, Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch