Line 25500 – How to calculate the residency deduction

Note: Line 25500 was line 255 before tax year 2019.

There are two parts to the residency deduction:

If you are the only person in the household claiming the basic residency amount for a particular period and dwelling, you can also claim the additional residency amount.

To claim the deduction that most benefits your household, you should consider the taxable income of all the members of your household when deciding which one of you will claim the residency deduction. 

Deduction limits for the residency deduction

Example 1

Katie and her husband John moved from Vancouver, British Columbia, to their new house in Yellowknife, Northwest Territories, on March 15, 2022. Yellowknife is located in a prescribed northern zone

Katie and John lived in the prescribed zone for a continuous period of at least six consecutive months (March 15, 2022 to December 31, 2022 = 9.5 months [291 days]). Therefore, Katie and John are each entitled to claim the basic residency amount for 291 days in 2022. However, John does not need to claim the northern residents deductions for 2022 because he did not have taxable income in 2022.

Katie can claim $11 for each day that she lived in Yellowknife (291 days) and an additional residency amount of $11 per day because she maintained and lived in a house (considered a dwelling) during the 9.5 months and she is the only person in her household claiming the basic residency amount.

Katie will complete the "Zone A" section in Step 2 – Calculate your residency deduction of Form T2222, Northern Residents Deductions

Example 2

Assume the same facts as in Example 1. However, Katie and John move to Vanrena, Alberta, instead. Vanrena is located in a prescribed intermediate zone. Therefore, Katie and John are each entitled to claim the basic residency amount for 291 days in 2022 as they lived in a prescribed intermediate zone for a continuous period of at least six consecutive months.

Katie can claim $5.50 for each day that she lived in Vanrena (291 days) and an additional residency amount of $5.50 per day as she maintained and lived in a house (which is considered a dwelling) during the 9.5 months and she is the only person in her household claiming the basic residency amount.

Katie will complete the Zone B section in Step 2 – Calculate your residency deduction of Form T2222.

What is a dwelling?

A dwelling is a self-contained domestic establishment. Generally, this is a complete and separate living unit with a kitchen, bathroom, sleeping facilities, and its own private access. It includes a house, an apartment, a mobile home, or another similar place of residence in which a person usually sleeps and eats. It does not include a bunkhouse, dormitory, hotel room, or room in a boarding house.

Dwelling provided rent-free by an employer

The CRA considers you to have maintained and lived in a dwelling, even if your employer let you live there rent-free and paid all the utility, maintenance, and other costs related to the dwelling.

Each person living in the dwelling can claim the basic residency amount as a deduction on their return. However, if more than one person claims the basic residency amount for a particular period and dwelling, no one in that household can claim the additional residency amount for that period and dwelling.

Special work site 

If your principal place of residence is not in a prescribed zone, you may still qualify for all or a portion of the basic residency amount for living at a special work site provided that the site is located in a prescribed zone and you resided at the site for at least six consecutive months.

If you received non-taxable benefits for board and lodging at a special work site (shown in either box 31 of your T4 slip or box 124 of your T4A slip), your residency amounts will be reduced.

Enter the amount of non-taxable benefits on line 4 or 9 of Form T2222 unless the special work site is 30 kilometres or more from the nearest point on the boundary of any population centre that has a population of at least 40,000 individuals.

For more information about special work sites, see Archived Interpretation Bulletin IT-91R4, Employment at Special Work Sites or Remote Work Locations.

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