Principal Issues: [TaxInterpretations translation] Can a student who incurs moving expenses to pursue post-secondary education deduct those expenses against employment income related to the student’s post-secondary education or against other employment income?
Position: The student cannot deduct moving expenses against future employment income. However, if it is determined that the relocation is for the purpose of both post-secondary education and employment, the student may be able to deduct the moving expenses against that employment income. In addition, it is necessary that the move be an eligible relocation as defined in subsection 248(1) of the Income Tax Act.
XXXXXXXXXX 2007-024272
August 22, 2007
Dear Sir,
Subject: Deductibility of moving expenses for students
This is in response to your email of June 26, 2007, requesting our views on the deductibility of moving expenses incurred by a student in the context of the increase in the scholarship exemption announced in the 2006 Federal Budget.
More specifically, you asked whether a student can deduct moving expenses, originally incurred in order to attend a post-secondary institution, against employment income related to the student’s post-secondary training or against other employment income, regardless of whether the employment is located in the region of the educational institution or in any other region.
Unless otherwise indicated, all statutory references herein are to provisions of the Income Tax Act (the "Act").
Our Comments
The situation you have indicated in your letter appears to relate to an actual situation involving a specific taxpayer. As stated in paragraph 22 of Information Circular 70-6R5 dated May 17, 2002, it is our practice not to issue written opinions on proposed transactions otherwise than by way of advance rulings. Furthermore, when it comes to determining whether a completed transaction has received appropriate tax treatment, that determination is made first by our Tax Services Offices as a result of their review of all facts and documents, which is usually performed as part of an audit engagement. However, we can offer the following general comments that we hope may be helpful to you. These comments may, however, under certain circumstances, not apply to your particular situation.
Under subparagraph 62(1)(c)(ii), a taxpayer who is a student may deduct moving expenses incurred for the purpose of attending a post-secondary educational institution on a full-time basis. However, the amount deductible cannot exceed the scholarship and bursary income included in the taxpayer's income.
The 2006 Federal Budget announced an increase in the scholarship and bursary exemption so that a student - enrolled in a program that qualifies for the education tax credit - generally does not have to include the amount of the scholarship or bursary in income. Under that amendment, a student can no longer deduct moving expenses where the student’s income is derived solely from scholarships or fellowships.
Thus, in the situation you presented, a student who incurs moving expenses to pursue post-secondary education cannot deduct those expenses against future employment income - whether or not the employment is located in the region of the educational institution - related to the new training.
However, a student who incurs moving expenses both to pursue post-secondary education and to take up employment - as opposed to employment obtained after the completion of post-secondary education - would be able to deduct the moving expenses against employment income provided the move constitutes an eligible relocation. You will recognize that this is a determination of fact that can only be made in light of all the relevant circumstances.
For more information on eligible moving expenses, please refer to Interpretation Bulletin IT-178R3 (Consolidated), Moving Expenses, available on the Canada Revenue Agency's website at http://www.cra-arc.gc.ca/E/pub/tp/it178r3-consolid/READ-ME.html.
These opinions are not advance decisions and, as stated in paragraph 22 of Information Circular 70-6R5 of May 17, 2002, are not binding.
Best regards,
François Bordeleau, Advocate
Interim Manager
Business and Partnerships Section
Business and Partnerships Division
Income Tax Rulings Directorate.