Moving Expenses Deduction in 2026: Understanding the 40-Kilometre Rule

Relocating for a new job, business opportunity, or post-secondary education can be expensive.

Truck rentals.
Real estate commissions.
Temporary lodging.
Travel costs.

Many Canadians assume:

“If I moved for work, I can deduct everything.”

Not quite.

The moving expense deduction is governed by Income Tax Act (ITA) s.62, with calculation guidance in CRA Form T1-M – Moving Expenses Deduction.

The key threshold is simple:

Your new home must be at least 40 kilometres closer to your new work location.

But the details matter.

Let’s examine this clearly.

 

Step One: The 40-Kilometre Test (ITA s.62)

To qualify, your move must bring you:

At least 40 kilometres closer (by the shortest public route) to your new work location.

This is not a straight-line measurement.

It is measured by normal travel routes.

If you were 70 km from your old workplace and are now 25 km away:

70 km – 25 km = 45 km closer → You qualify.

If you were 70 km away and move to 35 km away:

70 km – 35 km = 35 km closer → You do not qualify.

The 40-kilometre rule is absolute.

No rounding.

 

What Triggers Eligibility?

Under ITA s.62, moving expenses may be deductible if you moved to:

• Earn employment income
• Carry on business at a new location
• Attend post-secondary education as a student

The move must be tied to income generation.

Personal preference alone does not qualify.

 

What Expenses Are Deductible?

CRA Form T1-M outlines eligible expenses.

Generally, deductible expenses include:

Transportation and Travel

• Vehicle mileage
• Airfare
• Meals (using simplified or detailed method)
• Lodging en route

Moving and Storage

• Movers
• Packing
• Storage costs

Selling Your Old Home

• Real estate commissions
• Legal fees
• Mortgage discharge penalties

Buying a New Home (if applicable)

• Legal fees
• Land transfer taxes (if you sold your prior home)

Temporary Living Expenses

• Up to 15 days of meals and lodging

These must be reasonable and directly related to the move.

 

What Is Not Deductible?

You generally cannot deduct:

• Improvements to make your home more saleable
• Loss on sale of property
• Mortgage interest (except limited circumstances)
• Expenses reimbursed by your employer

Double claiming is prohibited.

 

Income Limitation Rule

This is critical.

Under ITA s.62:

Moving expenses may only be deducted against income earned at the new location.

If you moved for employment:

You can deduct moving expenses only up to the amount of employment income earned at the new location in that year.

If expenses exceed that income:

The unused portion may be carried forward to offset income from that same new location in future years.

This prevents using the deduction to shelter unrelated income.

 

Example Scenario

You relocate from Calgary to Edmonton for employment.

Your move satisfies the 40-kilometre test.

Total eligible moving expenses: $18,000
Employment income at new location in 2026: $60,000

You may deduct the full $18,000.

If employment income were only $10,000:

You could deduct $10,000 in 2026
Carry forward $8,000 to offset future income from that job.

 

Business Owners and Self-Employed Individuals

If you move to:

• Start or expand a business
• Relocate operations

The same 40-kilometre rule applies.

Expenses must relate to earning business income.

Documentation standards are higher for self-employed individuals.

 

Students Moving for Education

Students moving to attend post-secondary education may deduct moving expenses against:

• Taxable scholarships, fellowships, bursaries, or research grants
• Employment income earned at the new location

Again, income limitation rules apply.

 

Documentation Requirements

CRA expects:

• Receipts
• Closing statements
• Travel logs
• Mileage records
• Employer letters (if applicable)

The T1-M form must be filed with your return.

Precision matters.

 

Common Misunderstandings

“If I move for work, I automatically qualify.”
Only if you meet the 40-kilometre test.

“I can deduct expenses against all income.”
Only income from the new location.

“Employer reimbursement doesn’t matter.”
Reimbursed expenses are not deductible.

“I can claim both buying and selling costs even if I didn’t sell.”
Certain deductions require disposition of the prior home.

 

Interaction With Family Enterprises

For owner-managers relocating:

• Moving closer to a corporate office may qualify
• Moving between provinces to expand operations may qualify
• Temporary moves require careful analysis

Family members employed by the corporation must independently satisfy the test.

Corporate reimbursements should be structured properly.

 

Planning Considerations for 2026

Before claiming:

• Confirm the 40-kilometre requirement is satisfied
• Confirm income at the new location supports the deduction
• Ensure no double reimbursement
• Maintain full documentation

For high-income families, moving expenses can meaningfully reduce taxable income — but only when structured properly.

 

Final Thoughts

Under ITA s.62, the moving expense deduction is precise.

The 40-kilometre rule is objective.

CRA Form T1-M governs reporting.

The deduction is legitimate — but not automatic.

For professionals, entrepreneurs, and families building businesses across provinces, relocation must be evaluated with statutory clarity.

Tax efficiency begins with disciplined documentation.

At Shajani CPA, we bring legal precision and strategic foresight to every major life transition.

Tell us your ambitions, and we will guide you there.

This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. ©2026 Shajani CPA.

Shajani CPA is a CPA Calgary, Edmonton and Red Deer firm and provides Accountant, Bookkeeping, Tax Advice and Tax Planning service.