Moving and relocation expenses, including housing loss

You may provide a benefit , an allowance , or a reimbursement  to your employee for moving, or relocation expenses or to compensate for a housing loss.

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• Steps
• References

Steps

1. Determine if any exceptions apply to the benefit

   If the benefit is for a home relocation or a home purchase loan, do not continue to the next step.

   Refer to: Loans and employee debt

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    If the benefit is not for a home relocation or a home purchase loan, continue to: Step 2 – Determine if the benefit is taxable.

2. Determine if the benefit is taxable

   Generally, if you provide a benefit , an allowance , or a reimbursement  to your employee for moving or relocation expenses, or to compensate for a housing loss, the amounts paid are taxable.

   Depending on your situation, the amounts paid may not be taxable under the CRA's administrative policy  or the Income Tax Act.

   Moving or relocation expenses

   Situation: You pay or reimburse your employee for moving or relocation expenses

   Non-taxable situation

   If you pay or reimburse your employee for certain moving or relocation expenses, the benefit is generally not taxable if your employee moved to a new home to work at a new location inside or outside Canada. This applies where:

   • You transferred your employee from one of your places of business to another
   • Your employee accepted employment at a different location from the location of their former residence
   • You pay certain expenses to move your employee, their family, and their household effects when the employee finished their employment duties in a remote area

   Type of expenses that are not taxable

   The following expenses you pay or reimburse your employee for moving or relocation expenses are not taxable benefits:

   • Cost of house hunting trips to the new location, including child care and pet care expenses while your employee is away
   • Travelling costs (including a reasonable amount spent for meals and lodging) while your employee and members of your employee’s household were moving from the old residence to the new residence
   • Cost to your employee of transporting or storing household effects while moving from the old residence to the new residence
   • Costs to move personal items such as automobiles, boats, or trailers
   • Charges and fees to disconnect telephones, television or aerials, water, space heaters, air conditioners, gas barbecues, automatic garage doors, and water heaters
   • Fees to cancel leases
   • Cost to your employee of selling the old residence (including advertising, notarial or legal fees, real estate commission, and mortgage discharge penalties)
   • Charges to connect and install utilities, appliances, and fixtures that existed at the old residence
   • Adjustments and alterations to existing furniture and fixtures to arrange them in the new residence, including plumbing and electrical changes in the new residence
   • Automobile licenses, inspections, and drivers’ permit fees, if your employee owned these items at the former location
   • Legal fees and land transfer tax to buy the new residence
   • Cost to revise legal documents to reflect the new address
   • Reasonable temporary living expenses while waiting to occupy the new permanent accommodation
   • Long-distance telephone charges that relate to selling the old residence
   • Amounts you paid or reimbursed for property taxes, heat, hydro, insurance, and grounds maintenance costs to keep up the old residence after the move, when all reasonable efforts to sell it have not been successful

   Taxable situation

   Generally, if you pay or reimburse your employee for moving or relocation expenses that are not included in the above list, the amounts paid are considered taxable benefits.

   Situation: You provide a non-accountable allowance to your employee for moving or relocation expenses

   Non-taxable situation

   Under the CRA’s administrative policy, if you provide a non-accountable allowance  to your employee for incidental moving or relocation expenses because of an employment-related move, the allowance is not taxable if all of the following apply:

   • You provide your employee with a non-accountable allowance of $650 or less for incidental moving or relocation expenses
   • Your employee must certify in writing that they incurred moving and relocation expenses for at least the amount of the allowance

   The CRA considers a non-accountable allowance of $650 or less to be a reimbursement of expenses the employee incurred because of an employment-related move and the allowance is not taxable.

   Taxable situation

   If the allowance does not meet the conditions above, the allowance is taxable.

   If the allowance is more than $650, but meets all other conditions above, only the part of the allowance that is more than $650 is taxable.

   Housing loss

   Situation: You pay or reimburse your employee for a housing loss

   Under the Income Tax Act, if you pay or reimburse your employee to compensate for a housing loss, the amount is a taxable benefit for your employee.

   How is a housing loss determined

   A housing loss is the actual loss or decline in value of the house and is determined as follows at any particular time:

   • Greater of:
     • The adjusted cost base (ACB)  of the residence at that time
     • The highest fair market value (FMV)  of the residence within the six month period that ends at that time
   • minus Situation:
     • If the residence was disposed of before December 31 of the following year, lesser of the proceeds of disposition or the FMV of the residence at that time
     • In any other case, the FMV of the residence at that time
      
   • equals Housing loss

   What is FMV

   FMV is the highest price that can be gotten in an open market between an informed, and willing buyer and an informed and willing seller who are dealing at arm's length.

   This determination must be done based on a review of the facts in each specific situation.

   What is ACB

   Generally, the ACB is the cost of a property plus any expenses to acquire it, such as commissions and legal fees, and any additions or improvements to the property (excluding current expenses such as maintenance and repairs).

   Partly-taxable situation

   If you pay or reimburse your employee for an eligible housing loss, only 50% of the amount paid that is more than $15,000 is taxable.

   What is an eligible housing loss

   An eligible housing loss is a housing loss in respect of an eligible relocation.

   If the relocation meets all of the following conditions, it is an eligible relocation:

   • Your employee moved to work at a new work location. The new work location must be in Canada, unless your employee is absent from Canada, but resident in Canada 
   • Before the move, your employee ordinarily resided at the old residence and after the move, your employee ordinarily resides at the new residence
   • Your employee's new residence is at least 40 kilometres closer (by the shortest public route) to the new work location
     How to calculate the distance

     • Kilometres between the old residence and the new work location
     • minus Kilometres between the new residence and the new work location
     • equals Distance must be at least 40 kilometres
   • Your employee’s old residence and new residence are both in Canada, unless your employee is absent from Canada, but resident in Canada 
   • Only one residence can be designated for an eligible housing loss in respect of an eligible relocation

   Fully taxable situation

   If the housing loss does not meet all of the conditions above, the amount paid is not an eligible housing loss and the full amount of the payment for a housing loss is taxable.

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   •  If the benefit is not taxable, you do not need to do any calculations.

     Do not continue to the next step.

   • If the benefit is taxable, continue to: Step 3 – Calculate the value of the benefit.

3. Calculate the value of the benefit

   If the benefit is taxable, you must calculate based on the following benefit provided:

   Moving or relocation expenses

   Calculate: Payment or reimbursement for moving or relocation expenses

   • Value of the benefit received or enjoyed
   • minus Any amounts your employee reimbursed you
   • equals Value of the benefit to be included on the T4 slip using code 40 and box 14

   Example – Calculations

   An employer paid for moving expenses related to an employee’s move made for personal reasons. The total amount paid by the employer was $3,500.

   • $3,500 is the value of the benefit received
   • minus $0 is the amount because the employee did not reimburse the employer
   • equals $3,500 is the value of the benefit to be included on the T4 slip using code 40 and box 14
   Calculate: Non-accountable allowance for moving or relocation expenses

   • Value of the non-accountable moving allowance
   • minus $650 (Step 2, if all conditions met)
   • equals Value of the taxable part of the moving allowance
   • minus Any amounts your employee reimbursed you
   • equals Value of the benefit to be included on the T4 slip using code 40 and box 14 (if the amount is zero or negative, do not report an amount)

   Example – Calculations

   An employer provides a non-accountable moving allowance of $750 to an employee. Their employee’s move is considered an eligible relocation. The employee provided a letter certifying that they had spent at least $650 in incidental moving expenses.

   • $750 is value of the non-accountable moving allowance
   • minus $650 (Step 2, if all conditions met)
   • equals $100 is the value of the taxable part of the moving allowance
   • minus $0 is the amount because the employee did not reimburse the employer
   • equals $100 is the value of the benefit to be included on the T4 slip using code 40 and box 14

   Housing loss

   Calculate: Payment or reimbursement for eligible housing loss

   1. Calculate the value of the housing loss benefit

      • Amount of the payment for the housing loss
      • minus $15,000 (Step 2, if all conditions met)
      • equals Result 1
      • multiply by 50%
      • equals Value of the benefit for the calculations to be included on the T4 slip using code 40 and box 14 (if the amount is zero or negative, do not report an amount)

      If you distribute the payments across two years or more (for example, 2022 and 2023), the amount must be included in each year it was received or enjoyed.

       Continue to: Step 3b – Calculate the value of the housing loss benefit for the payment made in a subsequent year

   2. Calculate the value of the housing loss benefit for the payment made in a later year (if applicable)

      • Total of all amounts paid in the current or previous year for the housing loss
      • minus $15,000 (Step 2, if all conditions met)
      • equals Result 1
      • multiply by 50%
      • equals Result 2
      • minus Value of the benefit for eligible housing loss that was included on the previous year’s T4 slip
      • equals Value of the benefit for the later year calculations to be included on the T4 slip using code 40 and box 14

   Example – Calculations

   In June 2023, you agreed to compensate Paul, your employee, for any eligible housing loss that he incurred on the sale of his house. Paul started to work at his new work location on December 1, 2023.

   Paul's eligible housing loss amounted to $65,000. You paid out the compensation in two payments: $30,000 in September 2023 and $35,000 in February 2024.

   1. Calculate the value of the housing loss benefit

      • $30,000 is the amount of the payment for the housing loss in September 2023
      • minus $15,000 (Step 2, if all conditions met)
      • equals $15,000 is the result 1
      • multiply by 50%
      • equals $7,500 is the value of the benefit for the first year calculations to be included on the T4 slip using code 40 and box 14 in 2023

   2. Calculate the value of the housing loss benefit for the payment made in 2024

      • $65,000 is total of all payments paid in the current or the previous year for the housing loss
      • minus $15,000 (Step 2, if all conditions met)
      • equals $50,000 is the result 1
      • multiply by 50%
      • equals $25,000 is the result 2
      • minus $7,500 is the value of the benefit that was included on the employee's T4 slip in 2023
      • equals $17,500 is the value of the benefit to be included on the employee's T4 slip using code 40 and box 14 in 2024
   Calculate: Payment or reimbursement for housing loss not eligible

   If the amount was paid for a housing loss that was not an eligible housing loss, the amount paid to your employee for the housing loss is taxable. Therefore, the amount paid to your employee equals the value of the benefit that must be included on the employee’s T4 slip using code 40 and box 14.

   Example – Calculations

   An employer paid their employee $20,000 in compensation for the loss they incurred when the employee sold their home to move for their work. The employee’s new residence was only 25 kilometres closer to their new work location than the employee’s old residence. The loss is not an eligible housing loss because the new residence must be at least 40 kilometres closer to the new work location. In this example, $20,000 is the value of the benefit to be included on the employee’s T4 slip using code 40 and box 14.

   The amounts must be included in the pay period they were received or enjoyed.

4. Withhold payroll deductions and remit GST/HST

   The withholding and remitting requirement depends on the type of remuneration: cash , non-cash , or near-cash .

   If the benefit is taxable, you must withhold the following deductions:

   • Non-cash and near-cash: Option 1

     Withhold:

     • Income tax
     • CPP
     • EI (do not withhold)

     Remit:

     • GST/HST in certain situations

   • Cash: Option 2

     Withhold:

     • Income tax
     • CPP
     • EI

     Do not remit:

     • GST/HST (do not remit)

   The amounts must be included in the pay period they were received or enjoyed.

    Learn how to calculate deductions and the GST/HST to remit: How to calculate – Calculate payroll deductions and contributions

5. Report the benefit on a slip

   If the benefit is taxable, you must report the following amounts on the T4 slip:

   • Non-cash and near-cash: Option 1

     Report on:

     • Box 14, Employment income
     • Box 26, CPP/QPP pensionable earnings
     • Code 40, Other taxable allowances and benefits

   • Cash: Option 2

     Report on:

     • Box 14, Employment income
     • Box 24, EI insurable earnings
     • Box 26, CPP/QPP pensionable earnings
     • Code 40, Other taxable allowances and benefits

    Learn how to report on a slip: Fill out the slips and summaries – File information returns (slips and summaries).

References

Legislation