Moving Expenses Across the Border: Why Neither Country Deducts Them, and How Employer Reimbursements Are Taxed Differently

A Canadian moving to the US for a job, or an American moving to Canada, will look for a moving expense deduction and find none. Canada deducts moving expenses only for an eligible relocation, which requires both the old and the new home to be in Canada (with narrow exceptions); the US suspended its moving expense deduction for everyone except active-duty military in 2018 and made the suspension permanent in 2025. What remains is the treatment of employer reimbursements, which the two countries handle in opposite ways: Canada excludes reasonable employer-paid moving costs from the employee's income; the US includes them as wages.

Key takeaways

• Canada: moving expenses are deductible on Form T1-M for an eligible relocation: a move at least 40 km closer to a new work or study location, where both residences are in Canada, or where the taxpayer is a full-time student moving to or from Canada, or where the taxpayer moves from outside Canada to Canada as a resident. A Canadian resident moving out of Canada and becoming a non-resident has no deduction.
• US: the moving expense deduction (and the exclusion for employer-paid moving expenses) is suspended for all but active-duty military members moving under orders; the 2025 tax law made this permanent, adding intelligence community members to the exception.
• Employer reimbursements, Canada: reasonable moving costs paid or reimbursed by an employer are not a taxable benefit (with a $650 exemption for non-accountable allowances and specific rules on home loss reimbursements above $15,000).
• Employer reimbursements, US: all employer-paid or reimbursed moving expenses are taxable wages to the employee, subject to withholding and FICA.
• Cross-border move: no deduction in either country; a US employer's relocation package is taxable in the US; a Canadian employer's package for a move to the US is tax-free in Canada to the extent it relates to the Canadian employment and is reasonable.

Canada's rules

An eligible relocation requires that the taxpayer moved to be employed, carry on business, or study full-time at a new location, and that the new home is at least 40 km closer to the new work or school. Both the old and new homes must be in Canada, except: a student moving to or from Canada to study; an individual who moves from outside Canada to Canada and becomes resident (deductible against income at the new location); and an individual who is a factual or deemed resident of Canada throughout (a Canadian who moves abroad on a temporary posting while remaining a Canadian resident, such as a government employee).

A Canadian who moves to the US and becomes a non-resident has no eligible relocation and no deduction. The expenses (movers, travel, temporary accommodation, lease cancellation, selling costs on the old home, legal fees on the new home) are simply personal.

Deductible amounts for an eligible relocation are claimed against income earned at the new location, with a carryforward.

The US rules

The Tax Cuts and Jobs Act suspended the moving expense deduction and the exclusion for qualified moving expense reimbursements for 2018 through 2025, except for members of the Armed Forces on active duty moving under military orders. The 2025 tax law made the suspension permanent and extended the exception to certain intelligence community employees. For everyone else, moving expenses are personal and non-deductible, and any employer payment or reimbursement is wages.

Employer reimbursements

Canada. An employer that pays or reimburses reasonable moving expenses for an employee's relocation (including a move to or from Canada) does not create a taxable benefit for the employee. Non-accountable allowances above $650 are taxable. Reimbursement of a loss on the sale of the old home is tax-free up to $15,000 and half-taxable above it. The employer deducts the cost.

United States. All employer moving assistance (movers, travel, temporary housing, home sale assistance, lump-sum allowances) is included in the employee's W-2 wages, subject to income tax withholding and FICA. Employers commonly gross up the payment so the employee is whole after tax, which increases the taxable amount. A Canadian recruited by a US employer with a $30,000 relocation package receives $30,000 of taxable wages (or a grossed-up amount), taxed in the US at the marginal rate.

The cross-border move

Canadian to the US, US employer pays. The relocation package is US wages; taxable in the US; subject to withholding. No Canadian deduction (non-resident after the move). If any of the package is paid before the residency start date and relates to the pre-move period, it may be Canadian-source and Canadian-taxable, but most packages are paid on arrival.

Canadian to the US, Canadian employer pays (a transfer within a company). A reasonable reimbursement by the Canadian employer is not a taxable benefit in Canada. Whether it is US-taxable depends on timing and sourcing: paid while the employee is still a Canadian non-resident of the US and relating to the Canadian employment, it is not US-source; paid after US residency begins, it is income to a US resident. Most companies structure the payment before the move.

American to Canada, Canadian employer pays. Not a taxable benefit in Canada. Taxable wages for US purposes (the US citizen reports worldwide income) with a foreign tax credit that does not help because Canada did not tax it. The US tax on the package is a real cost.

American to Canada, no employer. No deduction in the US; in Canada, a move from outside Canada to Canada is an eligible relocation if the person becomes a resident and moves to work or study at the new location, so the moving expenses are deductible against income at the new location on the first Canadian return.

Worked example

A Toronto engineer is recruited by an Austin company with a $25,000 relocation allowance and moves on July 1; a Montreal colleague is transferred by her Canadian employer to its Houston office with the Canadian company paying $25,000 of moving costs in June.

• Toronto engineer. No Canadian deduction; the $25,000 is US wages on the W-2, taxed at about 24% federally (no Texas tax): roughly $6,000 of tax. The employer may gross up.
• Montreal colleague. No Canadian or Quebec taxable benefit on reasonable reimbursed costs; paid in June before US residency; not US-source; no US tax. The $25,000 is tax-free.
• Difference. Roughly $6,000, driven entirely by who paid and when.

Official sources

"Your new home must be at least 40 kilometres closer (by the shortest public route) to your new work location or school." Generally, "your move must be from one place in Canada to another place in Canada." — Canada Revenue Agency, Line 21900 – Moving expenses, https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-21900-moving-expenses.html

"If you're a member of the Armed Forces on active duty, you may be eligible to deduct unreimbursed moving expenses or exclude reimbursed moving expenses for you, your spouse, and your dependents if your move was due to a military order and permanent change of station." — Internal Revenue Service, Topic no. 455, Moving expenses for members of the Armed Forces, https://www.irs.gov/taxtopics/tc455

Practitioner note

The moving expense question has a short answer (no deduction) and a longer one about the employer's cheque. A Canadian employer's reimbursement paid before departure is tax-free in both countries; a US employer's paid after arrival is taxable in full. For intra-company transfers, we ask the employer to pay the Canadian side before the move date, and we tell recruits to negotiate the gross-up.

See also: Planning a move? Start with the Canada-to-US tax checklist and browse every corridor by city, province, and state.

Next step

Fairlight prepares the employer reimbursement structuring and timing for cross-border relocations, and the departure-year and first-year returns. See cross-border pricing or book a call.