Tax implications guide on relocation benefits for military personnel

As Canadian Armed Forces military personnel, you are eligible for relocation benefits that may be taxable. This information is intended to help you understand which relocation benefits are deemed taxable by Canada Revenue Agency (CRA). This information is meant as a guide only and does not supersede CRA regulations.

What you are eligible or not eligible to claim on your personal income tax return will depend upon your particular circumstances and members should refer to CRA regulations for confirmation.

For the official CRA regulations, please refer to the Moving expenses and relocation benefits section on Canada.ca.

You may access a CRA move expenses claim form (T1-M Moving Expenses Deduction Form) and additional information pertaining to Line 219 on your income tax return by visiting the link to Line 219 – Moving expenses.

Taxable or non-taxable benefit

According to CRA, taxpayers are generally taxed on the value of all benefits they receive by virtue of their employment, other than certain items that have been excluded from taxation. The taxable benefits received from your employer due to a relocation will appear on your T4/RL1. For example, if you receive $1000 worth of taxable benefits, then you will be responsible to pay taxes on this amount at your marginal tax rate as if it were additional income.

For the most part, relocation benefits are not taxable as they are deemed a condition of employment. For any benefits that are not taxable as per CRA, you will simply receive these funds from your employer and they will not be included on your T4/RL1 slip.

CRA regulations stipulate that in order to receive a non-taxable benefit from your employer for relocation expenses:

* Relocations that do not meet the “40 km rule” in the first bullet above but fall under article 1.1.03, “Eligibility Application” in the Canadian Forces Integrated Relocation Program Directive are entitled to receive non-taxable benefits under that directive.

Deductible or non-deductible benefit

In some cases, you may incur expenses during your relocation that are not paid or reimbursed to you by your employer.  Some of these expenses may be considered by CRA to be eligible for a tax deduction. If eligible, the expense may be deducted from your employment income by way of a Form T1-M attached to your personal income tax return.

In general, only moves within Canada are eligible unless the individual making the foreign move is still considered to be Canadian resident.

Benefits table

The following tables are intended to show you which Canadian Forces Integrated Relocation Program Directive benefits are taxable and non-taxable. The tables also list which benefits that if not reimbursed by your employer, may qualify as a deduction on your personal income tax return.

For example, if you are eligible to receive a benefit that is reimbursable from your custom/personalized fund but your funding envelope is not large enough to cover the full amount, this expense may be “deductible” as indicated and the T1-M form may be added to your income tax return.

Description Employer reimbursed Not reimbursed
Taxable
(Note 22)
Non taxable

Deductible
(Personal Income Tax Return)

Non deductible
Administratives
Non-accountable incidentals – maximum $650 (Note 1)    
Personalized cash payout    
Posting allowance    
House hunting trip (HHT)
HHT – Car rental    
HHT – Flight change fees    
HHT – Dependent care    
HHT – Destination marketing fee (DMF) lodging    
HHT – Excess baggage    
HHT – Ferries/Parking/Road tolls    
HHT – Gas expenses    
HHT – Incidental allowance    
HHT – Local commercial transport    
HHT – Lodging commercial    
HHT – Lodging private/RV    
HHT – Meal allowance    
HHT – Meal allowance dependants    
HHT – Mileage (Note 2)    
HHT – Mileage to/from commercial transportation (Note 2)    
HHT – Pet boarding    
HHT – Phone/Fax/Internet    
HHT – Transportation – Commercial air/Boat/Bus    
HHT – Transportation dependants    
Destination inpection trip (DIT)
DIT – Car rental    
DIT – Dependant care    
DIT – Destination marketing fee    
DIT – Excess baggage    
DIT – Ferries    
DIT – Gas expenses    
DIT – Incidental allowance    
DIT – Local commercial transportation    
DIT – Lodging commercial    
DIT – Lodging dependants    
DIT – Lodging private/RV    
DIT – Meal allowance dependants    
DIT – Meal allowance    
DIT – Mileage to commercial transportation (Note 2)    
DIT – Parking    
DIT – Pet boarding    
DIT – Phone/Fax/Internet    
DIT – PMV mileage (Note 2)    
DIT – Road tolls    
DIT – Transportation air    
DIT – Transportation bus    
DIT – Transportation dependants    
Spousal employment services
Spousal services – Car rental    
Spousal services – Copy/Transmittal    
Spousal services – CV/Resume preparation    
Spousal services – Gas    
Spousal services – Incidental allowance    
Spousal services – Commercial lodging & DMF    
Spousal services – Lodging private    
Spousal services – Meal allowance / Meals    
Spousal services – Mileage (Note 2)    
Spousal services – Ferry/Parking/Road tolls    
Spousal services – Commercial Transportation    
Destination rental
Cleaning at Destination – Renter    
Credit verification    
Rent in advance    
Rental agency finding fees – Inside Canada    
Disposal of rental unit
Cleaning at Origin – Renter    
Lease liability (Note 3)    
Home sale
Appraisal fee    
Attending/Power of Attorney – Sale    
Capital improvement (Note 9)  
Cleaning at origin    
Fees to courier documents for sale    
Equity loss (Note 9)  
Home inspection gee – Home sale (Note 8)    

Specialized inspection – Sale (Note 8)

   
Home staging – Sale    
Land titles conversion – Sale    
Legal disbursements – Sale    
Legal fee – Sale    
Legal fee over pre-negotiated rates – Quebec – Sale    
Marketing incentive (Note 10)    
Mortgage discharge consultation fee    
Mortgage discharge fee    
Mortgage early repayment penalty    
Private sale expenses    
Real estate commission    
Real estate incentive    
Survey/Certification of location – Sale    
Home purchase (Replacement residence)
Attending/Power of Attorney – Purchase    
Bridge financing / Short term loan interest    
Cleaning at destination    
Home inspection fee – Purchase    
Specialized inspection – Purchase    
Well/Water potability test    
Interest on home relocation loan (Note 4)    
Labour for altering locks    
Legal disbursements – Purchase    
Legal fee – Purchase (Note 17)    
Mortgage appraisal fee    
Mortgage default insurance – Application fee    
Mortgage default insurance – Premium    
Mortgage interest buy down (Note 5)    
Mortgage interest rate differential – Purchase (Note 6)    
Municipal land transfer tax (Note 17)    
Municipal name change for tax roll    
New home warranty    
Second mortgage unsold residence – Administration/Legal    
Second mortgage unsold residence – Interest (Note 7)    
Interest on a short term loan    
Survey/Certification of location – Purchase    
Title insurance    
Home renovations for disabled (Note 12)    
Interim lodgings, meals and miscellaneous expenses (ILM&M)
ILM&M – Miscellaneous allowance    
ILM&M – Car rental    
ILM&M – Dependent care    
ILM&M – Destination marketing fee (DMF) (Note 11)    
ILM&M – Ferry/Parking/Road tolls    
ILM&M – Gas expenses    
ILM&M – Local commercial transport    
ILM&M – Lodging commercial (Note 11) & (Note 16)    
ILM&M – Lodging private/RV (Note 11) & (Note 16)    
ILM&M – Meal allowance (Note 11) & (Note 16)    
ILM&M – Pet boarding    
Travel to new location
TNL – Car rental    
TNL – Destination marketing fee (DMF) (Note 11)    
TNL – Excess baggage    
TNL – Ferry/Tolls/Parking    
TNL – Lodging commercial (Note 11)    
TNL – Lodging private (Note 11)    
TNL – Meal allowance (Note 11)    
TNL – Miscellaneous allowance    
TNL – Mileage (Note 2)    
TNL – Pet boarding    
TNL – Shipment of pets    
TNL – Commercial - Air/Boat/Bus    
Unaccompanied moves
Unaccompanied moves – Car rental    
Unaccompanied moves – Commercial transportation    
Unaccompanied moves – Interim lodgings (Note 11)    
Unaccompanied moves – Interim meals (Note 11)    
Unaccompanied moves – Interim miscellaneous allowance    
Unaccompanied moves – Lodging commercial (Note 11)    
Unaccompanied moves – Mileage to commercial carrier (Note 2)    
Unaccompanied moves – Parking/Road tolls    
Unaccompanied moves – Travel meals (Note 11)    
Unaccompanied moves – Travel mileage (Note 2)    
Unaccompanied moves – Travel miscellaneous allowance    
Unaccompanied baggage transport rental    
Unaccompanied baggage travel to CMTT    
Return trip to finalize sale
Return/Finalize sale – Car rental    
Return/Finalize sale – Commercial transportation    
Return/Finalize sale – Destination marketing fee (DMF)    
Return/Finalize sale – Incidental allowance    
Return/Finalize sale – Lodgings    
Return/Finalize sale – Meal allowance    
Return/Finalize sale – Mileage (Note 2)    
Return/Finalize sale – Parking    
Return trip to assist move (Note 20)
Return to assist – Car rental    
Return to assist – Commercial transportation    
Return to assist – Destination marketing fee (DMF)    
Return to assist – Incidental allowance    
Return to assist – Local commercial transport    
Return to assist – Lodging    
Return to assist – Meals    
Return to assist – Mileage (Note 2)    
Temporary dual residence assistance (TDRA)
TDRA – Maintenance (Note 15)    
TDRA – Mortgage interest (Note 13)    
TDRA – Property insurance (Note 14)    
TDRA – Property tax (Note 14)    
TDRA – Rental of a mobile pad    
TDRA – Utilities (Note 14)    
Reverse temporary dual residence assistance (RTDRA) (Note 16)
RTDRA – Mortgage interest    
RTDRA – Property insurance    
RTDRA – Property tax    
RTDRA – Rental mobile pad    
RTDRA – Utilities    
RTDRA – Rental cost    
RTDRA – Maintenance    
RTDRA is assistance provided with expenses related to the destination residence
Foreign costs (Note 21)
Currency exchange fee    
Driver’s driving record    
HG&E custom clearance    
International driver’s license    
Letter of compliance    
Loss on exchange    
Medical exams/Inoculations    
Passport    
Passport photo    
USA federal immigration document    
Value added tax forms (VAT)    
Visa    
Transportation to long term storage (LTS)
Transportation to LTS – Car rental    
Transportation to LTS – ILM&M    
Transportation to LTS – Travel (Note 2)    
Basic (dis)connection/installation
Alarm system    
Appliance (gas lines, water lines, etc.)    
Cable/Satellite    
Cell phone activation    
Electrical utility    
Electrical conversions services    
Hot Tub lines    
Hydro utility    
Internet activation    
Natural gas/oil utility    
Telephone activation    
Water    
Vehicles
Driver’s license  plates/Fees    
PMV commercial storage    
PMV modification    
PMV storage preserve/Restore    
Preparation for transportation    
Shipment of vehicle    
Shipment recreational vehicle    
Travel to PMV depot (Note 2)    
Vehicle registration    
Vehicle safety certificates    
Sundry/Additional expenses
ATM charges    
Collections/Antiques appraisal    
Crating charges    
Insurance on moving goods    
Shipment of household goods    
Storage charge    
Transfer medical/Dental files    
Change of address    
Post office mail hold    

Notes

Note 1: Expenses related to this benefit may be reimbursed without receipts; however, if they are not reimbursed, they could be deductible as long as they qualify as ‘eligible moving expenses’ as per CRA guidelines and are supported by receipts. You can find more information on what qualities as ‘eligible moving expenses’ at www.cra-arc.gc.ca (Line 219 Moving Expenses) or by contacting a tax professional.

Note 2: Mileage that is not reimbursed is deductible as per CRA guidelines. Please note that CRA mileage rates may differ from those reimbursed under the IRP Program.

Note 3: Termination penalty does not include any rental payments for a period during which the taxpayer occupied the residence. [Reference: ITA SS 62(3), IT-178R3]

Note 4: Where an interest-free home relocation loan is received, interest calculated at prescribed rates at the time the loan was received is included as a benefit. For the first five years of the loan, the taxpayer can take a deduction for the benefit calculated up to the amount of interest that would have been incurred if the loan had been for $25,000. [Reference. ITA SS. 80.4(4), T4130]. Taxable amount reflected on box 36 over the amortization period of the loan and the deductible amount in box 37.

Note 5: Taxable if no employer involvement in negotiating loan. Non-taxable if employer assists in negotiating loan and the mortgage rate will never fall below the prescribed interest rate [ITA SS. 6(23), ITA SS 80.4(1), and IT-4211R2].

Note 6: Taxable if no employer involvement in negotiating loan, where an employee incurs a higher interest rate on a mortgage as a result of an employer-requested relocation, the mortgage interest rate differential payments for the remaining term of the mortgage are not taxable. Non-taxable if employer assists in negotiating loan and the mortgage rate will never fall below the prescribed interest rate. [ITA SS. 6(23), ITA SS 80 4(1), IT-421R2. Case law – Splane vs. M.N.R. (90 DTC 6042, [1990] 2 C.T.C. 199, and 92 DTC 6021, [1991] 1C.T.C. 406)]

For an employer-requested relocation, where an employee incurs a higher interest rate on a mortgage, the differential payments for the remaining term of the mortgage are not taxable. If the relocation is not employer-requested, it is taxable if there is no employer involvement in negotiating the loan and non-taxable if the employer assists in negotiating the loan and the mortgage rate will never fall below the prescribed amount. [TN 6, Payment of Mortgage Interest Subsidy by Employer]

Note 7: Mortgage interest on the old residence is taxable as it is considered a financing charge. Where the interest has been included in income or paid by the taxpayer, it is deductible only to a maximum of $5,000, for the old residence during the period that reasonable efforts are being made to sell it, and it is neither rented out nor occupied by the taxpayer or a member of the taxpayer’s household. The sum of all of these types of expenses is subject to a combined $5,000 deduction limit. [ITA SS. 6(23), ITA SS.62 (3), IT-178R3]

Note 8: Deductible only if the expenses were necessary to effect the sale of the home.

Note 9: A taxpayer is required to include in income as a taxable benefit all amounts paid in respect of an eligible housing loss, to the extent of the amount, if any, by which one-half of the amounts so paid in the year or a prior year exceed in total $15,000, minus any amounts for this taxable benefit that have been included in the taxpayer’s income for preceding years. The taxpayer who is not reimbursed, or is only partly reimbursed, for the removal expenses may be able to claim certain of the expenses incurred as a deduction from income. This to say that certain removal expenses that may affect the calculation of the Home Equity Assistance may be otherwise deductible as a moving expense, for example legal fees on sale. These otherwise deductible moving expenses are addressed separately in the policy. [References: ITA SS.6 (19)-(22), 62, IT-470R]

Note 10: May be deductible if does not relate to “work done to make the property more saleable”.

Note 11: Cost to the taxpayer of meals and lodging near the old residence or the new residence for the taxpayer and members of the taxpayer’s household is deductible for a period not exceeding 15 days [Reference: ITA S.62(3), IT-178R3]. If paid by the employer, expenses are non-taxable if reasonable.

Note 12: This expense is not deducted as moving expenses, however, may qualify for non-refundable tax credit as home accessibility expenses.

Note 13: Mortgage interest on the old residence is taxable as it is considered a financing charge. Where the interest has been included in income or paid by the taxpayer, it is deductible only to maximum of $5,000, for the old residence during the period that reasonable efforts are being made to sell it, and it is neither rented out nor occupied by the taxpayer or a member of the taxpayer’s household. The sum of all of these types of expenses (including Note 14) is subject to a combined $5,000 deduction limit. [ITA SS. 6(23), ITA SS.62 (3), IT-178R3]

Note 14: Deductible only to a maximum of $5,000, for the old residence during the period that reasonable efforts are being made to sell it, and it is neither rented out nor occupied by the taxpayer or a member of the taxpayer’s household. The sum of all of these types of expenses is subject to a combined $5,000 deduction limit. [ITA SS.62 (3), IT-178R3]

Note 15: Any maintenance other than ground maintenance is taxable. [Reference: T4130]

Note 16: Board and lodging at a special work site, and transportation between the principal place of residence and special work site, are generally not taxable. A special work site is a location at which the duties performed by the taxpayer were of a temporary nature, if the taxpayer maintained at another location a self-contained domestic establishment as the taxpayer's principal place of residence that was available for occupancy and not rented out and to which, by reason of distance, the taxpayer could not reasonably be expected to have returned daily from the special work site. As a general rule, duties will be considered to be of a temporary nature if it can be reasonable expected that they will not provide continuous employment beyond a period of two years. It should be noted that the two year limitation is not part of the legislation; it is a CRA guideline. There have been cases when duties were performed at a location for more than two years and the nature of the duties was considered temporary. [ITA SS.6 (6), IT-91R4]

Note 17: Legal fees, land transfer taxes and registration of title fees of the new residence will not be allowed as a moving expense deduction until the old residence is sold. The deduction will be allowed in the year the old residence is sold.

Note 18: Legal fees, land transfer taxes and registration of title fees of the new residence will not be allowed as a moving expense deduction until the old residence is sold. The deduction will be allowed in the year that the old residence is sold.

Note 19: Where an employer reimburses reasonable expenses that match the definition of "moving expenses" as per ITA 62(3) in respect of a move, if the employer is determined to be the primary beneficiary of the relocation then the 40 km criteria need not be met.  It is the responsibility of the employer to determine whether the primary beneficiary of the move is the employer or the employee.  If the benefit is determined to be with the employer, the reimbursement of the relocation expenses are not considered to be taxable to the employee [Reference: Technical Interpretation 2016-0629351E5 (E) "Reimbursement of moving expenses"]

Note 20: Travelling costs incurred in the course of moving the taxpayer and members of the household are deductible. Does not appear to be limited to the trip from the old destination to the new destinations, so a return trip should be permitted as long as it relates to travel for the move and is for a reasonable amount. [ITA SS.63 (2) (a), IT-178R]

Note 21: The concept of “absent from Canada, but resident in Canada” An individual who is absent from Canada, but resident in Canada (see 4.3 (a), (c) and 4.4(c)) would include an individual considered resident in Canada because the individual maintained residential ties with Canada while abroad (factual resident), and an individual deemed by subsection 250(1) to be a resident of Canada. [Reference: Income Tax Folio S5-F1-C1, 1.10 - 1.21 - Factual residence – leaving Canada and 1.34 - 1.36 - Other deemed residents]

Note 22: Any reimbursed taxable relocation expenses will be reported to DRBM and source deductions will be debited through the pay system when applicable. T4/RL1 will reflect taxable benefits and deductions.

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