When writing off moving expenses, the route you take matters
If you move, you can write off your moving expenses on your tax return provided the distance between your old residence and your new work location is at least 40 kilometres greater than the distance between your new residence and the new work location. A recent tax case decided earlier this month focused on how the 40 kilometre distance should be measured.
The issue was whether a taxpayer who moved from Cochrane, Alta., to Calgary around August 2012 in order to have a shorter commute to her new job was entitled to write off approximately $17,000 of moving expenses on her 2012 tax return.
Both the taxpayer and the CRA agreed that the distance between her new home and her new place of work is 15 kilometres but what was under dispute was the distance between her old home and the new work location. The CRA argued that the distance was 40 kilometres while the taxpayer maintained that it was approximately 60 kilometres.
This distance was crucial to a successful moving deduction claim because, if the CRA’s position was correct, then the taxpayer would not be entitled to claim her moving expenses since the distance between her old residence and new location was only 25 km (i.e. 40 km – 15 km) greater than the distance between her new home and her new work location.
The CRA argued that the distance should be measured “by a major urban road that is about 40 kilometres…(being)…the shortest normal route.”
The taxpayer, however, argued that commuters traveling between her old home and the new work location during the 2012 taxation year “would typically not use the urban route. (Rather)…they would take an efficient freeway route around the city (a ring road) in order to by-pass detours and delays on the urban route caused by the construction of light rail transit.” Since the ring road route was approximately 60 kilometres, the new home would therefore be 45 kilometres (60 km – 15 km) closer to her new work location and she should be entitled to the moving expense claim.
Should the distance be measured by the urban route or the ring road?
Citing prior jurisprudence, the judge summarized the general principle that in determining whether a taxpayer has actually moved 40 km closer to work, “it only makes sense to measure the distance he has moved using real routes of travel.” Further case law suggests that the distance should generally be measured by the shortest route that one might travel to work, provided it is “a normal route used by the traveling public.”
In the taxpayer’s case, clearly the urban route is shorter than the ring road but did the road construction on that route result in it “not being a normal route used by the traveling public(?)”
The judge concluded that since the Income Tax Act uses the term “distance,” it would not be appropriate “to stretch the term ‘distance’ to disqualify routes that are under construction.” The judge felt that measuring a distance using a route that is under construction is still appropriate provided the construction project does not last “an inordinate amount of time.”
The taxpayer provided evidence that the delays on the urban route began in 2010 and construction was expected to be completed by November 2012.
But the judge was unconvinced that the delays and detours lasted so long that the urban route was not an appropriate route for measuring the distance between the old home and the new workplace and, as a result, denied her moving expense deduction.