Q: Last April 2006, I accepted a job transfer from Hamilton to Toronto. It took me almost six months to sell my home and cost several hundreds of dollars to break my mortgage. In anticipation of the transfer, I purchased a new condo in 2005 which had a delayed closing that I finally moved into last September. I was forced to rent temporary accommodations before occupying my current condo. What expenses may I deduct for tax purposes?
A: Let me be one of the first to welcome you to the big city. Toronto offers many great amenities, such as transportation, restaurants, entertainment and a great lifestyle. I have to admit the slogan “There is no life like it” should apply to Toronto.
Taxpayers are allowed to claim eligible moving expenses for relocating within Canada for new a job, business or post-secondary education. The move must result with the taxpayer moving at least 40 kilometres closer to work or school. Moving expenses are a tax deduction and can be used to reduce income from the new job or business. To check if you have satisfied CRA’s 40K eligibility, you may wish to use MapQuest.com to determine the distance of your move.
Here is a list of moving expenses that will help you:
- The cost of selling your old residence such as legal cost, real estate commissions and mortgage penalties. Most of these expenses will be on your lawyer’s statement of adjustments.
- The cost of cancelling a rental lease.
- Storage cost incurred while your condo was being finished.
- Cost of moving truck and movers.
- Travel cost and a reasonable amount for meals and accommodations for the entire family.
- Temporary board and lodging cost up to 15 days for instances such as your rental of temporary accommodations.
- Connecting and disconnecting utilities as a result of the move.
- Transfer taxes of new home provided prior residence was sold. Don’t forget to claim.
- Limited cost to maintain unsold prior residence such as utilities.
Students should do their homework, as moving expenses can reduce taxes, particularly graduating students starting employment in a new city. It’s never too early to start getting professional advice.
Why not file again?
Q: I completed my degree and started a new job last year. I have never filed a tax return, as my parents did not think it was necessary and I did not owe any income taxes. Should I contribute to an RRSP to reduce my 2006 income taxes?
A: As your question was after the March 1, 2007 RRSP deadline, any contributions this year will have to be deducted on your 2007 income tax return. Therefore, RRSP contributions will not reduce your 2006 income taxes.
Your parents may have missed out on claiming your tuition and education credits for all the years of study, and perhaps tremendous tuition and education carry-forwards which can reduce much of your taxes in the first and future years of employment. To correct this: File tax returns for the years you attended university, include your tuition and education claims, and have your parents file amendments to those years. to claim the eligible transferable education amounts. Check with your accountant.
Henry Choo Chong, CGA provides accounting and tax services to individuals and businesses in the GTA. He can be reached at 416-590-1728, ext. 304. Any questions to Money matters should be e-mailed to email@example.com.