Labour Mobility Deduction (LMD): What It Is, Who's Eligible, and How to Claim It

What is the Labour Mobility Deduction (LMD)?

The LMD is a tax deduction introduced by the federal government to help tradespeople offset costs related to temporary relocation, including transportation, meals, and short-term accommodations. If you need to travel far from home for short-term work at a temporary construction site, this deduction allows you to claim these expenses starting from the 2022 tax year.

Who is Eligible for the LMD?

To be eligible for the LMD, you must be a tradesperson or apprentice working in Canada’s construction industry. This includes work related to activities like excavating, repairing, demolishing, or constructing buildings.

What is Classified as a Temporary Work Location?

A temporary work location refers to a job site outside the region where you were initially hired. For example, if you work for a construction company based in Toronto but are temporarily sent to work in Thunder Bay, this would qualify as a temporary work location.

What is Considered an Eligible Temporary Relocation?

To qualify for the LMD, you must meet these requirements:

• You must live in Canada, and your employer must require you to work at the temporary location.
• You must be away from your primary residence for at least 36 hours.
• The temporary work location must be in Canada.
• The temporary location must be at least 150 km closer to your temporary lodging compared to your permanent residence. For example, if you stay at a hotel in Sudbury, the hotel must be at least 150 km closer to your temporary job site than to your home in Toronto.

What Temporary Relocation Expenses Can I Claim?

While relocating for work, you can claim the following expenses:

• Transportation costs: Includes one round-trip between your home and temporary lodging (this can include public transportation).
• Meal expenses: For meals you had during your round-trip travels.
• Temporary lodging costs: Provided your principal residence remains available to you and is not rented out during your relocation.

You can claim expenses from the previous tax year, the current tax year, or up to February 1 of the following tax year. However, you cannot claim any expenses for which you were reimbursed or received financial assistance outside of your income.

What is a T777 Form?

The T777 Form, "Statement of Employment Expenses," is used to calculate your employment-related expenses, including those for temporary relocation. You must fill out this form and submit it along with your tax return to the CRA. By claiming the LMD on this form, you can reduce your taxable employment income. Remember, this deduction is available starting with the 2022 tax year.

How to Fill Out the T777 Form

To properly complete the T777 form, you’ll need to gather the following records:

• Daily expense logs, receipts, and canceled cheques
• Transportation tickets or stubs
• Invoices
• Housing agreements
• Credit card statements
• Work-related mileage for your vehicle (you can use either the detailed or simplified method)

Ensure you keep these documents in a safe place in case the CRA requests them for review.

How to Calculate Your LMD

Calculating your LMD is straightforward if you follow the right steps. You’ll need to calculate expenses separately for each temporary work location.

Your deduction is based on the total eligible expenses you incurred, capped at 50% of the income you earned at each temporary location. The combined total of all your LMD deductions is limited to $4,000 per year.

If you don’t earn enough income in a year to claim the full expenses (due to the 50% cap), you can carry forward the unclaimed portion to the following year.

For example, if you earned $6,000 and incurred $4,000 in expenses, you can only claim $3,000 in deductions ($6,000 x 50%). The remaining $1,000 can be carried forward to the next tax year.

Building a Solid Financial Foundation

Now that you understand the Labour Mobility Deduction for tradespeople, you can confidently claim eligible expenses and lighten the financial burden of temporary work relocations. Maximize this deduction to help offset job-related costs and reduce your taxable income.

Key Takeaways

• The Labour Mobility Deduction (LMD) allows eligible tradespeople to claim transportation, meals, and temporary lodging expenses, up to $4,000 annually.
• To qualify, you must be an eligible tradesperson or apprentice working in the construction industry in Canada.
• Be sure to complete and submit the T777 Form when filing your tax return.