Have a Canadian client who has lived in the US for the past several years and has moved back to Canada. Came back and was hired full time and will be staying. Is she allowed to write of the moving expenses moving from the US back to Canada? The move happened in 2022 and will not be claimed, if eligible, until the 2022 return.
You will need to answer several questions first in order to determine moving expense eligibility:
- Move eligibility – see below.
- Tax residency status – applies only to deemed or factual residents of Canada. First, you will need to determine to type of departure from Canada and then the type of re-entry to establish the residency type at the time of moved. If you client was a factual resident of Canada, then you would need to file all non-filed tax returns for non-statute barred years. It can take a very long time for you to familiarize yourself with the rules, for the client to gather all their data, and, for CRA to return with a determination. In the past I would file the tax returns without the move expense or the residency determination to get those filed. Then I would create an adjustment for the tax return with the possibly eligible claims along with the two Determination of Residency forms, NR73 and NR74. I would also obtain a copy of the US tax return and tax assessment in preparation for paper filing the missed Canadian tax returns, if any.
@sewsille1
If your client is married then you will need to complete all of the above for the spouse as well.
1. Can you claim a moving expense?
Employee or Self-Employed
If you have moved and established a new home to be employed or run a business at a new location , you can deduct eligible moving expenses from the employment or self-employment income you earned at your new location.
If you are an employee or a self-employed individual, select one of the following:
1B - You moved from outside Canada to a new work location in Canada
-
Tax residency status – applies only to deemed or factual residents of Canada.
Deemed,
https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/government-employees-outside-canada.html#deemedFactual
Factual residents
You may be a factual resident of Canada for income tax purposes if you keep residential ties with Canada while living abroad.
The term factual resident means that although you are not in Canada, you are still considered a resident of Canada for income tax purposes.
If you are a factual resident and a resident of another country with which Canada has a tax treaty, you may be considered a deemed non-resident of Canada for income tax purposes.
What are residential ties?
Residential ties may include:
- a home in Canada
- a spouse or common-law partner in Canada
- dependants in Canada
Secondary residential ties that may be relevant include:
- personal property in Canada, such as a car or furniture
- social ties in Canada, such as memberships in Canadian recreational or religious organaizations
- economic ties in Canada, such as Canadian bank accounts or credit cards
- a Canadian driver’s licence
- a Canadian passport
- health insurance with a Canadian province or territory
For more information on residency status, see Income Tax Folio S5-F1-C1, Determining an Individual’s Residence Status.
If you want an opinion about your residency status, complete and send Form NR73, Determination of Residency Status (leaving Canada) to the CRA.
Additional useful resources.
Income Tax and Benefit Package for Non-Residents and Deemed Residents of Canada for 2021
Income Tax Folio S5-F1-C1, Determining an Individual’s Residence Status
@sewsille1
You may also need to understand the Canada & USA tax treaty rules if your client retains any property, pension assets, or bank accounts in the US. In those cases your client will have tax filing requirements in the US for as long as he or she retains those assets or ties.
You would also need to complete the days physically in the USA for all years. This can be become quite complex. CPA Academy has some great introductory presentations on the various days and ties calculations. Most of training webinars are free. Some are paid. In any case, if you are supporting returning Canadians then you will need to be at least aware of when to dig deeper or when to hand this over to someone else who is a cross border tax specialist.
Here is another resource which might provide an introduction to this topic.
.
Was the client considered resident of Canada prior to the move?
If so, please read the definition of eligible relocation in 248(1), specifically the last part AFTER (c) where it modifies 248(1)(a)(i) of the definition to remove “in Canada”, AND excludes 248(1)(b) completely of the definition.
Thank you Tim.
Yes, she is Canadian. Moved down to States in 2017. She maintained her RRSP’s and bank account here and moved back in March of this year to take a job at a Toyota. Did not own a house prior to leaving, just rented.
Under no circumstances did I ask if she was Canadian. That is irrelevant to the problem. I asked if she was resident. That is the crux of the problem.
A non-resident Canadian Citizen can’t claim moving expenses. A non-citizen deemed resident of Canada can.
A citizen of Canada who is residing in the United States is very likely not resident, but that is for someone who is qualified on residential rules for tax purposes (as opposed to immigration purposes.)