Are you considering a relocation which involves the US?  If so, you should be aware of the changes to the rules for the moving expense deduction and the treatment of moving expenses which are reimbursed by your employer.  Public Law 115-97 (“HR.1”), formally known as “an Act to provide for the reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018”, formerly known as Tax Cuts and Jobs Act, has suspended the moving expense deduction, which was previously available to individuals for taxable years 2018 through 2025.

Whether you are an American expatriate abroad or if you’re considering a move to or from the US, the recent changes should be considered carefully before deciding whether to accept an offer of employment.  Conversely, if you are an employer you will need to recalculate the cost of offering relocation benefits as part of an employment offer or transfer package.


Under the tax rules applicable to 2017 and before, qualifying a moving expense could be deducted against an employee’s income provided all three tests were met.

  1. The moving expense must be incurred within one year of the date on which you first report to work at the new location;
  2. The new workplace must be at least 50 miles farther from your old home than your old job location was from your old home. If you had no previous workplace, your new job location must be at least 50 miles from your old home; and
  3. After relocating, the taxpayer must be employed full-time at the new job for at least 39 weeks during the first 12 months immediately following the arrival in the new location. There are exceptions to the time test, such as members of the armed forces moving due to a military order, seasonal workers, temporary absences from work including vacation and holidays, illness, and strike.

An employer had the option to reimburse an employee for qualified moving costs, which passed the expenses to the employer for who would then be permitted to deduct the expenses for corporate tax purposes.  The relocation benefit was not taxable to the employee, provided the expenses were paid or reimbursed in respect of a qualifying moving expense, and a deductible expense for the employer.


As of January 1, 2018, moving expenses are no longer deductible for individuals.  Furthermore, any moving expense paid to or on behalf of the employee will be considered a taxable benefit.  An example of a family of four, with adjusted gross income of $175,000, relocating from the US to an international location at the request of the employer:

Before HR.1 After HR.1
Airfare 6,000 6,000
Shipping 6,000 6,000
Moving expenses 12,000 12,000
Employee tax  (24%) – paid by employer * 3,789
Taxable wages – employee 15,789
Moving expense deduction

*This is at the option of the employeer and therefore the tax resulting from the taxable benefit may not be covered by te employer.


Relocation is an expensive venture.  Now that the cost of moving is no longer a deductible expense under HR.1, the decision to take a position that requires relocating may involve more thought.  Look at the dollars and cents or ask a professional.  Planning before you accept the job could save you a lot of money.



As a Canadian resident investing in Canadian real estate, you will have to report your worldwide income to the Canada Revenue Agency (“CRA”). This includes rental income from Canadian real estate. The CRA allows deductions for related expenses, such as insurance, mortgage interest, property taxes and repairs. A deduction for tax depreciation (capital cost allowance or CCA) on the property, excluding land, is also available. While claiming CCA cannot create a rental loss, which is deductible against other sources of income, it may reduce the net rental income to zero.

If you are a non-resident read this post.


The deemed disposition recognized at the time the change in use occurs is automatic. However, an election may be filed, under subsection 45(2) of the Income Tax Act, with the tax return in the year that the change occurs. By making the election, the change in use from a “personal use” property to an “income producing” property is deemed to occur with no immediate deemed disposition, meaning there is no taxable event recognized at that time. This election may preserve your right to designate the property as a principal residence for up to 4 years. If the election is made, CCA is not permitted to be claimed in any year. Claiming CCA will make the election invalid.
Planning should be undertaken to determine which option makes sense as there are a lot of factors which must be considered.


The rental property may be a home previously used as your primary residence. There are tax consequences when you change the use of the property from a personal use property to an income producing property. At the time, when you begin renting the property or the property is available for rent, a deemed disposition of the property is considered to occur. This means that you are required to report the disposition of your principal residence at fair market value. If you have not previously designated a property as a principal residence for the period over which the property was owned, you may be eligible for the principal residence exemption to recognize the deemed disposition on a tax-free basis.


Many Canadians chose to use their principal residence as an investment property to generate rental income. However, there are tax consequences when you change the use of your home from a personal use property to an income producing property. At the time, when you begin renting the property or the property is available for rent, a deemed disposition of the property is considered to occur. This means that you are required to report the disposition of your principal residence at fair market value. If you have not previously designated a property as a principal residence for the period over which the property was owned, you may be eligible for the principal residence exemption to recognize the deemed disposition on a tax-free basis.


Investing in real estate for the purposes of “flipping” is quite popular. If you are planning to flip properties, the tax treatment may be considered as ordinary income as opposed to capital gains. If you are in the business of buying and selling properties, the profit is taxed as business income. As a result, the capital gains treatment is not available. You will be subject to income tax at the marginal rates, on 100% of the profit.
The determination of the nature of the transaction as income or capital, is very fact based, however, it may be very easy for the CRA and the tax courts to consider “house flipping” to be business income. The courts generally look at the following factors when making the determination:

  •  taxpayer’s motive;
  • nature of the property sold;
  • the length of ownership;
  • frequency of similar transactions;
  • time and effort spent regarding the property and circumstances surrounding the sale of the property

GST/HST Considerations

Depending on the level and type of rental revenue, you may have to register and start collecting and remitting the GST/HST.

Accommodations rented for a consecutive period of more than one month are excluded from GST/HST.  However, GST/HST would be collected and remitted for commercial rentals and residential rentals where the occupancy period is less than one consecutive month (e.g. Bed & Breakfast, Airbnb, shared accomodations, etc.).

It is important to understand the many aspects of investing in Canadian real estate to ensure you are reporting the income properly as well as paying both income and sales taxes as applicable.

Click here for a downloadable PDF version of this post.


Coronavirus stimulus package

I was surfing the internet and came across an article that said I had to report my US real estate to the Canada Revenue Agency (“CRA”).  This can’t be right, so I called my tax advisor and she told me that was in fact true in certain circumstances. She went on to tell me that the penalty for not informing the CRA of my US real estate could cost me up to $2,500 per year!  I have owned that property for 8 years.  That’s a cost of $20,000! What am I going to do?!

The above situation is extremely common.  Canadians buying foreign real estate as an investment and renting it out are subject to foreign reporting obligations.  Failure to report certain property to the CRA may result in a failure to file penalty of up to $2,500 per year.  The issues are further complicated if the rental property is held by a US LLC.  The penalty shoots up to $12,500 per year.  It could be costly to get caught up.  Fortunately, the CRA has a Voluntary Disclosure Program (“VDP”), to encourage individuals and businesses to come forward and resolve issues of noncompliance under current regulations that span one or more tax years.  Coming forward under the VDP, is a chance to get caught up on past delinquencies and avoid paying large penalty and interest charges.

The application process requires full disclosure of information relating to income tax which is at least one year past due, or generalized and harmonized sales tax (GST/HST) that is one reporting period late.  The program also allows taxpayers to completely disclose information regarding other taxes such as excise tax, duties (under the Excise Act, 2001), and source deductions.  In exchange for coming forward, the taxpayer may have interest and penalties either waived or adjusted, as well as avoiding any criminal prosecution for tax avoidance.

But wait….

When March 1, 2018 arrives, there will be new rules for those interested in the Canadian VDP for non-compliant taxpayers to consider. There will be two VDP tracks: General and Limited.

Under the General Program, taxpayers will not be charged penalties and will not be referred for criminal prosecution related to the information being disclosed. The CRA will provide partial interest relief for years preceding the three most recent years of returns required to be filed.  The determination for which VDP track you will qualify will be on a case-by-case basis.  Some of the factors used by the CRA in making the decision include: dollar amount involved, number of years of non-compliance and the tax knowledge/sophistication of the taxpayer.

Changes to the General Program include the requirement of all unpaid taxes to be paid as a condition of qualifying for the program.  This means that the payment of unpaid tax must be made before you are admitted into the VDP.

Another change affects the “no-names” disclosures previously allowed.  The process of making a disclosure on a no-names basis has been eliminated.  A new “pre-disclosure discussion” maybe had by the taxpayer or the taxpayer’s representative with a CRA official, anonymously, however this discussion does not guarantee acceptance into either of the VDP tracks.

The new Limited Program, which will launch on March 1st, will not be as generous as the General Program.  Interest and penalties will not be waived or adjusted, however, criminal prosecution can still be avoided.  Applications by large corporations (i.e. having revenues in excess of $250 million in at least 2 of the last 5 taxation years, including related parties), will generally be considered under the Limited Program.  As with the General Program, any unpaid taxes must be paid before admittance to the VDP.

As has been the CRA’s position in the past, it will not accept taxpayers into either VDP track if they are already known to the agency or if a VDP submission was previously made.

If you have past due returns or forms with the CRA, please contact us as soon as possible before the rules change on March 1st.