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Jim Maroney

:: Student moving expenses deductible against income from scholarships, fellowships and bursaries

:: In some respects, heading off to the first-year of post-secondary study is a bit like going to kindergarten – the handholding that provided such comfort in grade school is suddenly gone and the fear of going-it alone sets in. This is particularly true if the student is relocating from out of town. Where a move from out of town is involved students may find some tax assistance is available to help out with the cost.

For starters, students can only deduct moving expenses if they move to attend courses as a full-time student. To be considered full-time, a student must take 60 per cent or more of the usual program course load at a post-secondary school such as a university, college or technical institute. Anything less than 60 per cent won’t entitle a student to claim moving expenses. Correspondence courses, no matter how involved, also fail to fly.

Eligible moves include moving to attend a qualifying institution in Canada and also leaving Canada to study at an educational institution abroad. In either case, a minimum distance test applies whereby the student’s new home must be at least 40 kilometres closer to the new educational institution. Not unexpectedly, this 40-kilometre distance must be measured by the shortest normal route open to the travelling public.

Eligible moving expenses consist of travelling expenses, including vehicle costs, meals and accommodation to move the student and any family members to their new residence. Costs incurred to transport and store household effects can also be claimed. If temporary accommodation is required, costs for up to 15 days including meals can be added to the list. An expense incurred to cancel a lease of a former residence would also be an eligible moving expense.

In the unlikely case the student owns a home, moving costs can include the cost of selling the former residence such as advertising, legal fees, real estate commission and mortgage penalty if an associated debt is paid-off before maturity.

In the equally unlikely event the student purchases a new home, legal fees and property transfer tax are eligible moving expenses – GST and property tax are not eligible to be claimed.

So the good news is that students can claim moving expenses; the bad news is that these expenses can only be claimed against award income. Award income includes scholarships, fellowships, bursaries, prizes, research grants and so on.

This is a significant limitation given most students don’t have income from such sources. This is particularly true when you consider the fact the first $3,000 of income from scholarships, fellowships and bursaries (but not prizes for achievement) is exempt from income tax in the first place.

Restricting the type of income against which moving expenses can be applied often leaves students in a position where they have unclaimed moving expenses in the year of their move. Provision is made for the student to claim the unused portion of moving expenses in the subsequent year, although the same income limitation applies.

This income limitation means that student moving expense claims are actually quite rare. In my opinion, employment earnings from the new work location should factor into the equation to give recognition to students who take up part-time work at their new home location in addition to their full-time studies.

The above deals with students moving to attend post-secondary on a full-time basis but what about students who are headed out into the workforce? Students moving to a new place of employment are entitled to claim moving expenses under the general rules that apply to all taxpayers. Moves of this nature obviously include students who have completed their studies and are in the process of starting their careers – less obvious is the student who moves to take on a summertime job between academic years.

The expenses that can be claimed in this case are identical, however, the income against which such expenses can be claimed consists of employment (or self-employment) earnings from the new work location.

In all cases, you must keep receipts in support of a moving expense claim. CCRA provides a form (T1-M) to assist in calculating eligible moving expenses, however, there is no requirement that this form be submitted with the taxpayer’s return. Despite this apparent lax approach, it’s a statistical certainty that CCRA will request the taxpayer to provide backup for all moving expense claims so students should be sure to have all their ducks in order if they are in a position to deduct moving expenses.

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Free Tax Advice Article Submitted to Income Tax Canada.net exclusively by Jim Maroney
CA Canadian Chartered Accountant with Brown, Andrews & Maroney in Maple Ridge, BC, Canada

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