Thinking of Moving Up North for a Job? 

By Randall Orser | Personal Income Tax

The north is thought to be a desolate place, however, that’s not the case anymore. It could be a good time to find a job in the Northern parts of Canada. There are credits for being a northern resident, and they could be good enough to make that move worthwhile.

Northern Residents Deduction

There are two northern residents’ deductions:

  • a residency deduction (Step 2 of Form T2222) for having lived in a prescribed zone; and
  • a deduction for travel benefits (Step 3 of Form T2222) you received from employment in a prescribed zone that was included in your income.

You qualify if you have lived on a permanent basis, in a prescribed northern zone (Zone A) or a prescribed intermediate zone (Zone B) for a continuous period of at least six consecutive months. This period can begin or end in the tax year specified on Form T2222, Northern Residents Deductions. To determine if you lived in the prescribed zone on a permanent basis, we consider the number of your absences from the prescribed zone and the purpose and length of your absences.

If you have not lived in a prescribed zone for a continuous period of at least six consecutive months at the time you file your return, you do not yet qualify. File your return without making the claim. When you qualify, you can ask us to adjust your return.

Your period of residency is not affected if you moved from one place in a prescribed zone directly to another place in a prescribed zone. Absences from a prescribed zone - If you lived in a prescribed zone on a permanent basis, absences from a prescribed zone do not usually affect your period of residency. If you lived in a prescribed zone for work-related reasons (while your principal place of residence was not in a prescribed zone), you may qualify for the deduction.

Can you claim the deduction for travel benefits?

You can claim the deduction for travel benefits for expenses you incurred to travel or the value of travel provided by your employer if you meet all of the following conditions:

  • you qualify to claim northern residents’ deductions;
  • you are an employee dealing at arm's length with your employer; and
  • you must have included in your income (in the same year that you have the travel expenses) the taxable travel benefits that you received from your employment in a prescribed zone.

If you take a trip that begins and ends in one year and you are reimbursed the following year, you cannot claim the deduction for travel benefits for that trip.

You can claim a deduction for travel benefits if you leave on a trip in one year and return the next year. For example, you may leave on a trip in December and come back in January. If you receive non-refundable tickets or travel vouchers, the taxable travel benefit should be included in your T4 slip or T4A slip for the year the trip begins.

Taxable travel benefits include:

  • travel assistance provided by your employer such as airline tickets or a trip on the company owned airplane; and
  • a travel allowance or a lump-sum payment you received from your employer for travel expenses you incurred.

Any travel expenses, excluding those for employment purposes, which are paid for by your employer, are generally considered taxable benefits.

The maximum deduction you can claim for each eligible trip is the lowest of the following three amounts:

You can claim a deduction for travel benefits even if you are not claiming a residency deduction. For example, if your spouse or common-law partner claims both the basic and the additional residency amounts, you can still claim a deduction for any taxable travel benefits you received.

You cannot claim a deduction for travel benefits if:

  • you or any member of your household received or was entitled to receive non-taxable amounts as travel assistance, a travel allowance, or as a reimbursement for travel expenses; or
  • someone else has already claimed the deduction for travel benefits for this trip on their return.

There are two parts to the residency deduction: a basic residency amount and an additional residency amount. The amount you can claim for these will depend on whether you lived in a prescribed northern or an intermediate zone.

For 2016, you can claim a basic residency amount of $11 for each day you lived in a prescribed northern zone. Or if you lived in a prescribed intermediate zone, you can claim $5.50 per day.

The additional residency amount is $11 for each day you lived in a prescribed northern zone. Or if you lived in a prescribed intermediate zone, it is $5.50 per day. You can claim this additional amount only if you maintained and lived in a dwelling in the northern or intermediate zone and you are the only person in your household claiming the basic residency amount.

  • Example 1: Eric and his wife Geneviève lived in a prescribed northern zone for 300 consecutive days during 2016. Eric’s basic residency amount is $3,300 (300 days x $11). Geneviève’s basic residency amount is also $3,300 (300 days x $11). Eric and Geneviève cannot claim the additional residency amount. This is because they lived in the same dwelling during the same period and they are each claiming the basic residency amount.
  • Example 2: Jane lived in a prescribed intermediate zone for 300 days during 2016. Her basic residency amount is $1,650 (300 days x $5.50). Her additional amount is also $1,650 (300 days x $5.50). This gives her a total claim of $3,300 ($1,650 + $1,650). Jane can claim the additional residency amount because she maintained and lived in a dwelling and is the only individual in her dwelling claiming the basic residency amount.

As you can see, moving up north may not be all that bad, and many people I know that moved up north are enjoying it very much.

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