Is employer relocation assistance taxable income in Canada?

It depends on what the employer pays for. Some relocation costs can be reimbursed by an employer on a tax-free basis — these are specific verified moving expenses. Other types of relocation assistance are taxable benefits. The key distinction is whether the employer is reimbursing the employee for actual, documented moving expenses or providing a general relocation allowance (lump sum). Actual expense reimbursements for qualifying moves are generally not taxable; lump sum allowances are taxable unless they fall under the $650 exempt rule.

What is the $650 exam rule for relocation assistance?

CRA has an administrative policy that allows employers to pay up to $650 as a non-accountable (lump sum) relocation allowance without it becoming a taxable benefit — provided the employee is relocating to a new work location that is at least 40 kilometres closer to the new work location than the old residence. This $650 represents an acknowledgment that there are always small miscellaneous moving costs that are difficult to document. Any lump sum above $650 is taxable. This threshold has not changed in many years and is frequently criticized as inadequate for a real relocation.

What moving expenses can an employer reimburse tax-free?

An employer can reimburse the following moving expenses on a tax-free basis when the move qualifies (40 km test) and the employee submits receipts: costs of moving household goods (moving company); travel costs for the employee and family to move to the new location (including meals and accommodation during the move); temporary storage costs; lease-breaking costs for the old rental; and certain other direct moving costs. The key is that these must be verified expense reimbursements — not a blanket allowance. The employee also cannot then claim these same amounts as moving expense deductions on their personal return.

If my employer reimburses my moving expenses, can I still claim moving expenses on my tax return?

Only for the portion not reimbursed by the employer. If your employer reimburses you $6,000 for actual moving expenses and your total qualifying expenses were $8,000, you may claim the unreimbursed $2,000 as a moving expense deduction on your personal return (Form T1-M) — subject to the normal moving expense rules. You cannot claim expenses that were already reimbursed by your employer on a tax-free basis. If the employer reimbursement was taxable (e.g., a lump sum), you may still be able to claim the full moving expenses as the taxable reimbursement was income and you need to track it separately.

What is a "housing loss benefit" and is it taxable?

A housing loss benefit is employer assistance to cover the loss an employee incurs when forced to sell their home due to a job relocation — for example, the employer pays the difference when the employee has to sell at a loss. CRA provides a partial exemption: the first $15,000 of a housing loss reimbursement is 50% taxable (half included in income); the remaining amount above $15,000 is fully taxable. This is a specific CRA rule for employer-assisted housing loss — not a common benefit but significant when it applies.

Does the 40-kilometre rule apply to relocation tax exemptions?

Yes. Most of the favourable tax treatment for employer-paid relocation costs requires that the employee's new residence be at least 40 kilometres closer (by the shortest usual public route) to the new work location than the old residence. This is the same 40 km test that applies to personal moving expense deductions. If the move does not meet the 40 km test, the relocation is not considered a qualifying move and most employer-paid costs become taxable benefits.

Is Relocation Assistance Taxable in Canada? | CRA Moving Allowance Rules

Is Relocation Assistance Taxable in Canada?

When an employer helps an employee move for work, not all of that assistance is taxable. CRA distinguishes between verified expense reimbursements (generally not taxable) and lump sum allowances (generally taxable, except the first $650). Understanding which category your relocation payment falls into determines whether it appears in Box 40 of your T4.

Core Rule

Type of relocation payment	Taxable?
Verified actual expense reimbursements (qualifying move)	❌ Not taxable
Non-accountable lump sum ≤ $650 (qualifying move)	❌ Not taxable
Non-accountable lump sum > $650	✅ Amount above $650 is taxable
General relocation payment (unrelated to documented expenses)	✅ Fully taxable
Housing loss benefit (first $15,000)	✅ 50% inclusion
Housing loss benefit (above $15,000)	✅ 100% inclusion

The 40-Kilometre Test

Requirement	Details
New residence must be	At least 40 km closer (shortest usual public route) to new work location than old residence
Applies to	Tax-free treatment for employer-reimbursed moving costs
Why it matters	If move doesn’t qualify, even actual expense reimbursements may be taxable
Same test as	Personal moving expense deductions (Form T1-M)

What Employers Can Reimburse Tax-Free (Actual Expenses)

Expense	Tax-free reimbursable?
Moving company / truck rental	✅ Yes
Packing materials	✅ Yes
Transportation of family to new location	✅ Yes
Meals and lodging during the move	✅ Yes (in transit)
Temporary storage of household goods	✅ Yes
Lease-breaking penalty (old rental)	✅ Yes
House-hunting trips (reasonable)	✅ Yes
Temporary accommodation at new location (up to 15 days)	✅ Yes
Property transfer taxes (purchase of new home)	✅ Generally yes — depends on employer plan
Legal fees on home purchase/sale	✅ Generally yes
Real estate commissions on old home sale	✅ Generally yes

What Is Taxable

Payment type	Taxable amount
Lump sum “relocation allowance” over $650	Amount above $650
Month-of-rent or cost-of-living top-up	Generally fully taxable
Mortgage interest differential payments (employer covers rate gap)	Fully taxable
Housing loss (first $15,000)	50% included in income
Housing loss (above $15,000)	100% included in income
Home purchase — employer provides a low-interest loan	Interest benefit is taxable (imputed interest)

The $650 Rule: Non-Accountable Allowance

Rule	Details
Amount	$650 maximum
Treatment	Not a taxable benefit
Qualifying move required	✅ Yes — 40 km test must be met
Purpose	Acknowledges small miscellaneous moving costs that are hard to document
Above $650	Fully taxable
Typical use	On top of specific expense reimbursements to cover incidentals

Can the Employee Still Claim Moving Expenses?

Scenario	Can employee claim Form T1-M moving expenses?
Employer reimbursed all direct costs (non-taxable)	✅ Only unreimbursed portion, if any
Employer paid lump sum (taxable)	✅ Can claim eligible moving expenses (separate tracking needed)
Employer reimbursed some — employee paid balance	✅ Employee can claim the unreimbursed eligible portion
Employee received tax-free reimbursement for expense	❌ Cannot claim it again — already received benefit

Housing Loss: Partial Exemption Example

Employee’s housing loss	Taxable amount
$12,000 loss, employer reimburses fully	$6,000 (50% of $12,000)
$25,000 loss, employer reimburses fully	$7,500 (50% of $15,000) + $10,000 (100% of $10,000) = $17,500

T4 Reporting

Box	Content
Box 40 — Other taxable allowances and benefits	Taxable portions of relocation payments
Box 14 — Employment income	Includes all taxable relocation amounts

Planning: Maximizing Tax-Free Treatment

Strategy	Description
Use verified reimbursement instead of lump sum	Have employer reimburse actual documented expenses vs a one-time payment
Claim moving expense deduction for any unreimbursed portion	File Form T1-M to recover tax on your own qualifying costs
Structure housing assistance carefully	First $7,500 of housing loss reimbursement has only 50% inclusion
Use up to $650 non-accountable allowance	On top of verified reimbursements

Bottom Line

Employer relocation assistance can be structured to be largely tax-free — but only if it follows CRA’s rules. Actual expense reimbursements for qualifying moves (verified with receipts) are not taxable. A lump sum up to $650 is not taxable. Anything above that, including a general moving allowance, is employment income. If your employer offers a single “relocation bonus” instead of tracking real expenses, most of that amount is taxable in your hands. Negotiating for expense reimbursement rather than a lump sum, and keeping all receipts, is the most tax-efficient approach to a job relocation.