Northern Residence Deductions

There are two northern residents deductions:

  • residency deduction (Step 2 of Form T2222) for having lived in a prescribed zone; and
  • 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 in Step 1 of Form T2222, Northern Residents Deductions.

To determine if you lived in the prescribed zone on a permanent basis, the CRA considers the number of your absences from the prescribed zone and the purpose and length of your absences.

Note

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 the CRA to adjust your return. To do so, follow the instructions at How to change 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. For more information about special work sites, go to Special work site.

Deceased individuals – A person who died in the year qualifies if he or she lived in a prescribed zone for six months or more before the date of death.

There are two parts to the residency deduction:

  • Basic residency amount – Claim this amount for the number of days in the year that you lived in a prescribed zone; and
  • Additional residency amount – Claim this amount for the days you used to calculate your basic residency amount if you maintained and lived in a dwellingin the prescribed zone during that time and you are the only person claiming the basic residency amount for living in that same dwelling for that period.

If you are the only person in the household claiming the basic residency amount for a particular period and dwelling, you can also claim the additional residency amount. To claim the deduction that most benefits your household, you should consider the taxable income of all the members of your household when deciding which one of you will claim the residency deduction.

Deduction limits for the residency deduction

  • If you lived in a prescribed northern zone (Zone A), you can claim:
    • a basic residency amount of $11.00 for each day that you lived in this zone; plus
    • an additional residency amount of $11.00 for each day you lived in this zone if you maintained a dwelling and you are the only person claiming the basic residency amount for that period and dwelling.
  • If you lived in a prescribed intermediate zone (Zone B), you can claim:
    • a basic residency amount of $5.50 for each day that you lived in this zone; plus
    • an additional residency amount of $5.50 for each day you lived in this zone if you maintained a dwelling and you are the only person claiming the basic residency amount for that period and dwelling.

Example

Katie and her husband John moved from Vancouver, British Columbia, to their new house in Yellowknife, Northwest Territories, on March 15, 2017.

Yellowknife, Northwest Territories, is listed as a prescribed northern zone (Zone A). Katie and John lived in the prescribed zone for a continuous period of at least six consecutive months (March 15, 2017 to December 31, 2017 = 8.5 months [292 days]). Therefore, Katie and John are each entitled to claim the basic residency amount for 292 days in 2017. However, John does not need to claim the northern residents deductions for 2017 because he did not have taxable income in 2017.

Katie can claim $11 for each day that she lived in Yellowknife (292 days) and an additional residency amount of $11 per day because she maintained and lived in a house (which is considered a dwelling) during the 8.5 months and she is the only person in her household claiming the basic residency amount.

To claim these amounts, Katie must complete the “Zone A section in Step 2 – Calculate your residency deduction of Form T2222, Northern Residents Deductions.”

If John claims the residency deduction for 2017, Katie cannot claim the additional residency amount because she is not the only person in her household claiming the basic residency amount.

To calculate your residency deduction, complete Step 2 of Form T2222, Northern Residents Deductions, for Zone A or Zone B, as indicated in Step 1.

What is a dwelling?

dwelling means a self-contained domestic establishment. Generally, this is a complete and separate living unit with a kitchen, bathroom, sleeping facilities, and its own private access. It includes a house, apartment, mobile home, or other similar place of residence in which a person usually sleeps and eats. It does not include a bunkhouse, dormitory, hotel room, or room in a boarding house.

Dwelling provided rent-free by an employer

Tha CRA considers you to have maintained and lived in a dwelling, even if your employer let you live there rent-free and paid all the utility, maintenance, and other costs related to the dwelling. Each person living in the dwelling can claim the basic residency amount as a deduction on their return. However, if more than one person claims the basic residency amount for a particular period and dwelling, no one in that household can claim the additional residency amount for that period and dwelling.

Special work site

If your principal place of residence is not in a prescribed zone, you may still qualify for all or a portion of the basic residency amount for living at a special work site provided that the site is located in a prescribed zone and you resided at the site for at least six consecutive months.

If you received non-taxable benefits for board and lodging at a special work site (shown in either box 31 of your T4 slip or box 124 of your T4A slip), your residency amounts will be reduced. Enter the amount of non-taxable benefits on line 4 or line 9 of Form T2222 unless the special work site is 30 kilometres or more from the nearest boundary of any population centre that has a population of at least 40,000 individuals.

For more information about special work sites, go to Interpretation Bulletin IT-91, Employment at Special Work Sites or Remote Work Locations.

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 (go to Do you qualify for the 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.

Complete the charts in Step 3 of Form T2222, Northern Residents Deductions to list the names and addresses of all individuals who lived with you in your residence during the period(s) indicated in Step 1 for the tax year and to calculate the deduction for travel 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.

Taxable travel benefits

You can claim a deduction for other travel (vacation or family reasons) if you have an amount in box 32 of your T4 slip or box 028 of your T4A slip showing any taxable travel benefits you received in the year. You can claim a maximum of two trips per year for other travel for each member of your household.

You can claim a deduction for medical travel if you have an amount in box 33 of your T4 slip or box 116 of your T4A slip showing any taxable travel benefits you received in the year. The medical services had to be for you or a member of your household and must not have been available where you lived. There is no limit on the number of trips for medical travel you can claim for each member of your household.

You can only claim a deduction for travel benefits for a trip that you or your household members (who lived with you at the time of the trip) actually took for vacation, family or medical reasons and that started from a prescribed zone.

If you received a benefit that was not for any particular trip, you have to split it reasonably between the trips you are claiming.

The taxable travel benefits you received for other travel (vacation or family reasons) is your total taxable travel benefits from box 32 of your T4 slip or box 028of your T4A slip, minus any amount received for medical travel from box 33 of your T4 slip or box 116 of your T4A slip.

If you are claiming a deduction for medical travel on Form T2222, no one can claim it as a medical expense on his or her return.

Travel expenses

Travel expenses include: air/train/bus fares, vehicle expenses, meals, hotel or motel accommodations, camping fees, and other incidental expenses such as taxis and road/ferry tolls.

To calculate meal and vehicle expenses, you may choose the detailed or simplified method. Your total travel expenses equal the total of the value of travel assistance provided by your employer and the travel expenses incurred by you. Include any travel expenses paid by your employer. For more information about the detailed or simplified methods including the different rates, go to Meal and vehicle rates used to calculate travel expenses for 2017 and previous years, or call 1-800-267-6999.

Notes

In cases of medical travel, if the patient needs an attendant while travelling, the attendant’s travel expenses are included as part of the patient’s total travel expenses, even if they are in the form of travel assistance your employer provided or actual expenses you incurred.

If you or a member of your household was the attendant:
In column 5 of Form T2222, include the cost of the attendant’s lowest return airfare as part of the patient’s expense for airfare. In column 4, include the cost of the attendant’s travel expenses (excluding airfare) as part of the patient’s travel expenses.

If you or a member of your household was not the attendant:
In column 5 of Form T2222, do not include the cost of the attendant’s lowest return airfare as part of the patient’s expense for airfare. In column 4, include the cost of the attendant’s travel expenses (including airfare) as part of the patient’s travel expenses.

Lowest return airfare

The lowest return airfare available at the time of the trip means the lowest return airfare ordinarily available for regularly scheduled commercial flights, excluding promotions or discounts that are not ordinarily available, on the date that the travel began. It also includes any GST/PST/HST and airport taxes. Additional charges, such as flight cancellation insurance, meals, and baggage surcharges are not considered part of the lowest return airfare.

The lowest return airfare to be used to complete column 5 of Form T2222 is the cost quoted for a flight from the airport closest to your residence to the nearest designated city to that airport (even if you did not actually travel by air or to that city).

The nearest designated cities are:

Vancouver, BC
Calgary, AB
Edmonton, AB
Saskatoon, SK
Winnipeg, MB
North Bay, ON
Toronto, ON
Ottawa, ON
Montréal, QC
Québec, QC
Moncton, NB
Halifax, NS
St. John’s, NL

Example

Katie and John moved from Vancouver, British Columbia to their new house in Yellowknife, Northwest Territories on March 15, 2017.

Yellowknife (and all the Northwest Territories) is listed as a prescribed northern zone (Zone A).

Katie started working at Smith Co. in Yellowknife and received a travel allowance from Smith Co. of $5,000 in 2017. The $5,000 travel allowance is included in box 32 of Katie’s 2017 T4 slip from Smith Co.

On November 1, 2017, Katie flew back to Vancouver, British Columbia to visit her mother and spent $1,500 on travel expenses. Katie took one trip in 2017. The lowest return airfare available at the time of the trip was $400.

The first step is to determine whether Katie’s travel expense qualifies for the deduction for travel benefits. It appears that all three conditions are met:

  1. Katie lives in a prescribed northern zone for at least six consecutive months.
  2. Katie and Smith Co. are not related.
  3. The $5,000 allowance received from Smith Co. is included in Katie’s income.

The second step is to calculate the amount Katie can claim as a deduction for travel benefits. Katie will complete Step 3 of Form T2222, Northern Residents Deductions. She will include her name as the person who took the trip in “Column 1” and the purpose of her trip (family reasons) in “Column 2”.

The amount of the deduction for travel benefits is calculated as the lowest of the following three amounts:

  1. The value of the allowance received from Smith Co : $5,000 (Column 3).
  2. The actual amount of Katie’s trip: $1,500 (Column 4).
  3. The lowest return airfare available at the time of Katie’s trip between the Yellowknife airport and the nearest designated city to that airport which is Edmonton: $400 (Column 5).

As Yellowknife, Northwest Territories is listed as a prescribed northern zone, Katie will enter $400 under the “Zone A” Column in Step 3.

Use Form T2222, Northern Residents Deductions, to calculate the northern residents deductions that you can claim.

Enter on line 255 of your return the amount from line 19 of Form T2222.

Note

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. To do so, follow the instructions at How to change your return.

Supporting documents

Supporting documents can include travel receipts, rent receipts, statements from your landlord, municipal taxes bill, and utility bills.

Filing online
Keep all your supporting documents in case we ask to see them at a later date.

Filing a paper return
Attach your completed Form T2222, but do not send your other documents. Keep them in case we ask to see them at a later date.

The rates for 2018 will be available on our website in 2019. If you are an employer, go to Automobile and motor vehicle allowances.

Meal and vehicle rates for previous years are also available.

The following applies to the 2017 tax year.

Meal expenses
If you choose the detailed method to calculate meal expenses, you must keep your receipts and claim the actual amount that you spent.

If you choose the simplified method, claim in Canadian or US funds a flat rate of $17/meal, to a maximum of $51/day (sales tax included) per person, without receipts. Although you do not need to keep detailed receipts for actual expenses if you choose to use this method, we may still ask you to provide some documentation to support your claim.

Vehicle expenses
If you choose the detailed method to calculate vehicle expenses, you must keep all receipts and records for the vehicle expenses you incurred for moving expenses or for northern residents deductions during the tax year; or during the 12-month period you choose for medical expenses.

Vehicle expenses include:

  • Operating expenses such as fuel, oil, tires, licence fees, insurance, maintenance, and repairs.
  • Ownership expenses such as depreciation, provincial tax, and finance charges.

Keep track of the number of kilometres you drove in that time period, as well as the number of kilometres you drove specifically for the purpose of moving or medical expenses, or for the northern residents deductions. Your claim for vehicle expenses is the percentage of your total vehicle expenses that relate to the kilometres driven for moving or medical expenses, or for northern residents deductions.

For example, if you drove 10,000 km during the year, and half of that was related to your move, you can claim half of the total vehicle expenses on your tax return.

Although you do not need to keep detailed receipts for actual expenses if you choose to use the simplified method, we may still ask you to provide some documentation to support your claim. Keep track of the number of kilometres driven during the tax year for your trips relating to moving expenses and northern residents deductions, or the 12-month period you choose for medical expenses. To determine the amount you can claim for vehicle expenses, multiply the number of kilometres by the cents/km rate from the chart below for the province or territory in which the travel begins.

Table of 2017 kilometre rates for the province or territory
Province or territory Cents/kilometre
Alberta 45.0
British Columbia 50.0
Manitoba 47.0
New Brunswick 50.5
Newfoundland and Labrador 54.0
Northwest Territories 59.5
Nova Scotia 50.0
Nunavut 58.5
Ontario 55.5
Prince Edward Island 49.0
Quebec 50.5
Saskatchewan 46.0
Yukon 60.5

*** This information was taken from the Canada Revenue Agency Website.***