Moving Expenses Deduction: Cross-Border Between Canada and the US

Canada allows a deduction for eligible moving expenses when you move to start a new job, run a business, or attend post-secondary school, and the new location is at least 40 kilometres closer to the new work or school. The US suspended the moving expense deduction for employees under the 2017 tax reform (TCJA), and the suspension is now permanent under the One Big Beautiful Bill Act. Only active-duty military members can deduct moving expenses on a US return. When you move between the two countries, the Canadian deduction may apply to the move itself, but the US deduction generally does not.

How does the Canadian moving expense deduction work?

ITA 62(1) allows a deduction for moving expenses paid in respect of an “eligible relocation.” The key requirements:

The 40-km test. The new home must be at least 40 kilometres closer (by the shortest usual public route) to the new work or school location than the old home. For a cross-border move from Toronto to New York, this test is easily met. The test is measured from old home to new work vs new home to new work.

Eligible expenses under ITA 62(3):

• Travel costs (including vehicle expenses, meals, and lodging) to move you and your household from the old residence to the new residence
• Transportation and storage costs for household effects
• Temporary lodging near the old or new residence (up to 15 days)
• Costs of cancelling a lease at the old residence
• Selling costs of the old residence (real estate commissions, legal fees, mortgage penalties)
• Costs of maintaining the old residence when vacant (up to $5,000, while reasonable efforts are made to sell it)
• Costs of connecting or disconnecting utilities
• Cost of revising legal documents to reflect the new address (driver’s license, vehicle registration)
• Cost of replacing a driver’s licence and non-commercial vehicle permits

What is not deductible: the purchase price of the new home, mortgage costs at the new location, home improvements to sell the old home, cleaning costs, or the cost of furnishing the new home.

Claimed against income at the new location. The deduction cannot create or increase a loss. If your moving expenses exceed your income earned at the new work location in the move year, the excess carries forward to the next year and is deducted against income from the same source.

Can I deduct the cost of moving from Canada to the US?

Yes, on the Canadian departure return, if you moved to start working or running a business at the new US location. The 40-km test is measured the same way, and the expenses are deductible against income earned at the new location. Since you are filing a Canadian departure return for part of the year, the deduction applies against the income you report on that return (which includes all income earned up to the departure date, plus any income from the new location that is also taxable in Canada).

If you don’t have enough Canadian income in the departure year to absorb the full deduction, the excess carries forward, but as a non-resident in the following year, you would need Canadian-source income to use it. For most movers, the full deduction is used in the departure year.

Can I deduct moving expenses on my US return?

Not if you are an employee. The TCJA suspended the moving expense deduction under IRC 217 for tax years 2018 through 2025, and the One Big Beautiful Bill Act made the suspension permanent. The only exception is for members of the Armed Forces on active duty who move pursuant to a military order (IRC 217(g)).

Before the suspension, the US deduction required a 50-mile distance test and a time test (39 weeks of full-time employment in the 12 months after the move, or 78 weeks in the 24 months for self-employed individuals). Those tests are now irrelevant for employees.

Self-employed filers: the deduction is also suspended for self-employed individuals. The pre-TCJA rules would have allowed it, but the suspension applies to all taxpayers except active-duty military.

What about employer-paid moving expenses?

US treatment. Under the TCJA (now permanent), employer-paid or employer-reimbursed moving expenses are taxable income to the employee. There is no exclusion. The employer reports the reimbursement on the W-2 as wages. The employee pays income tax and FICA on the reimbursement. The only exception is for active-duty military.

Canadian treatment. Employer-paid moving expenses that fall within the eligible categories under ITA 62 are generally not taxable to the employee. The CRA treats a reimbursement of eligible moving expenses as a non-taxable benefit. If the employer pays more than the eligible amounts (for example, a lump-sum relocation bonus), the excess is a taxable benefit.

This creates a cross-border mismatch. If a US employer reimburses $15,000 in moving expenses for a Canadian moving to the US:

• The $15,000 is taxable income on the US W-2.
• On the Canadian departure return, the underlying moving expenses are deductible (if eligible), but the US taxable inclusion creates income that is taxed on the US side with no offsetting deduction.

What about moving back to Canada from the US?

The same principles apply in reverse. The Canadian moving expense deduction is available for the move back, claimed against income earned in Canada at the new (return) location. The 40-km test is measured from the US home to the Canadian work location vs the Canadian home to the Canadian work location.

Employer-paid relocation for the return move is treated the same way: non-taxable in Canada if eligible, taxable in the US if the employer reports it on the W-2. Since you may not be filing a US return for the year of the return move (if you are no longer a US person), the US tax on the reimbursement may not apply, but this depends on your US tax status.

Are storage costs deductible?

Yes, in Canada. The cost of storing household effects is an eligible moving expense under ITA 62(3). There is no time limit specified in the statute, though the CRA expects the storage to be connected to the move and not indefinite. In practice, storage for a few months while you find permanent housing at the new location is straightforward.

In the US, storage costs were deductible under the old rules (30 consecutive days after moving) but are not deductible now that the deduction is suspended.

What should I do next?

If you are moving between Canada and the US, keep receipts for all moving expenses. Claim the Canadian deduction on the departure return (moving to the US) or the first Canadian return after arrival (moving to Canada). On the US side, the deduction is not available for employees, so focus on whether employer reimbursements can be structured to minimize the taxable inclusion.

• Leaving Canada permanently: tax checklist, the full departure checklist including the move
• Moving back to Canada from the US, the return-move checklist
• Canada departure tax and deemed disposition, what triggers tax on the move itself
• W-4 withholding for cross-border workers, setting up withholding at the new US job
• Standard deduction vs itemizing, the US deduction landscape without the moving deduction
• Tax equalization for corporate relocations, when the employer covers the move-year tax difference

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.