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

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). Which category your relocation payment falls into determines whether it appears in box 40 of your T4. This guide covers the employer side of a move; it is one of the allowance guides in the taxable employment benefits directory.

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

Tax-free treatment depends on a qualifying move: the new home must be at least 40 km closer to the new work location than the old one, or even actual expense reimbursements may be taxable. It is the same test used for the employee’s own claim, and the moving expenses tax deduction guide explains how distance is measured.

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, depending 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: the 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

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

The taxable portion is added to your income and taxed like salary; the guide to what taxable benefits are explains how box 40 works.

Your Own Moving Expense Claim

An employee can claim eligible moving expenses the employer didn’t reimburse tax-free, including costs covered by a taxable lump sum, but can’t claim an expense already reimbursed tax-free. The moving expenses deduction guide covers eligible costs and Form T1-M.

How the Package Is Structured Matters

Structure	Tax effect
Verified reimbursement instead of a lump sum	Actual documented expenses are reimbursed tax-free
Housing assistance within the first $15,000 of housing loss	50% inclusion ($7,500 of a $15,000 loss is taxable)
Up to $650 non-accountable allowance	Tax-free on top of verified reimbursements

A single “relocation bonus” paid instead of tracking real expenses is mostly taxable in the employee’s hands; reimbursement of receipted costs is not. A move that comes with a home-office arrangement raises a separate question, covered in the guide to work-from-home allowances.