The Tax Implications of Moving During COVID-19: What the Recent Khani Case Means for Remote Workers
The COVID-19 pandemic reshaped the way we work, pushing millions of Canadians into remote roles temporarily and for some permanently. For many, the transition was not seamless. Space constraints, distractions, and unsuitable home environments led some workers to relocate, believing that a better home setup was necessary for their professional success. But does moving houses for the same job qualify for tax-deductible moving expenses? A recent court decision— Khani v Minister of National Revenue — provides valuable insights into how tax authorities view these types of claims.
The Case of Ms. Khani: Relocating for a Better Home Office
In 2021, Ms. Khani, a sales professional working remotely due to pandemic restrictions, moved from Mississauga to Campbellville, Ontario, believing the new home would allow her to work more efficiently. She claimed $66,868 in moving expenses on her tax return, arguing that the move was essential to maintaining her employment and improving her work performance.
However, the Canada Revenue Agency (CRA) disallowed her claim, leading her to appeal the decision. The core legal issue was whether her move qualified as an “eligible relocation” under subsection 62(1) of the Income Tax Act. According to the law, a move must meet the following criteria to be deductible:
- The relocation must enable the taxpayer to be employed at a new work location.
- The new residence must be at least 40 km closer to the new work location than the old residence.
- The expenses must be directly related to the relocation.
Key Takeaways for Remote Workers Considering a Move
The Khani decision highlights some interesting and crucial lessons for remote employees who moved—or are considering moving—for work-related reason.
Moving to simply maintain a better work environment is not enough, the move must be primarily to retain employment, not just to improve working conditions. While the court acknowledged that the definition of “eligible relocation” must be interpreted in a manner that recognizes the reality that, particularly in the post pandemic work environment should be flexible enough to allow the Canadians the benefit available – they cannot be so flexible to render them meaningless. Thus, the court concluded that where a person with a home office moves to a new home, establishing a new home office, it is imperative that the taxpayer clearly be able to demonstrate that the relocation primarily occurred to enable the taxpayer to be employed at the new location and not for personal reasons.
Separating a taxpayer’s intention in the context of moving their family is a seemingly impossible task, as such significant life decisions are rarely influenced by a single factor. While the court acknowledges that a taxpayer’s personal statements are important in determining intention, they are not conclusive. Consequently, the court must distill an objective manifestation of purpose from all the evidence surrounding the taxpayer and their circumstances.
The Bottom Line
The Khani case serves as a cautionary tale for remote workers seeking tax deductions on moving expenses. While tax law is evolving to accommodate post-pandemic work realities, the burden of proof remains on the taxpayer to prove that their intention in moving was primarily required for employment rather than personal convenience.
If you’re unsure about your eligibility, consulting a tax professional can help ensure compliance and maximize potential deductions.
**Disclaimer: This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions, you should consult a lawyer.**
Neil La Marca
