Canada’s construction sector drives a significant chunk of the economy, with over 1.5 million skilled tradespeople working nationwide (Source). However, report frequent short-term travel between sites is negatively impacting their finances.
With builders shouldering much of the infrastructure mobility burden, the federal government has responded with targeted relief – the new Labour Mobility Deduction (LMD).
This innovative tax policy allows eligible tradespeople and apprentices to claim up to $4,000 per year in temporary relocation expenses when travelling for work.
What is the Labour Mobility Deduction?
The Labour Mobility Deduction (LMD) is a tax deduction that allows eligible tradespeople and apprentices to deduct temporary travel and accommodation costs related to work, up to a maximum of $4,000 per year.
Specifically, the LMD covers transportation, meals, and temporary lodging when you are required to travel over 150 km from your hometown for short-term work. It applies retroactively to expenses incurred since January 1, 2022.
The policy aims to provide financial relief for Canada’s skilled trades workforce facing rising travel and relocation costs to obtain employment in the construction industry.
Who Qualifies for the Labour Mobility Deduction?
To qualify for the LMD, you must meet specific eligibility criteria established by the Canada Revenue Agency. The table below outlines the key requirements:
| Criteria | Description |
| Eligible Tradesperson | Individual performing construction duties such as erection, excavation, installation, alteration, repair, demolition, and dismantling |
| Temporary Work Location | Location in Canada under temporary employment contract outside the locality of ordinary employment |
| Minimum Duration | Away from ordinary residence for at least 36 hours |
| Distance Requirement | Temporary lodging must be at least 150 km closer to the work location than an ordinary residence |
| Residence Status | Ordinarily reside at a residence in Canada; residence must remain available and not rented out during relocation |
| Employment Requirement | Relocation required by the employer to perform duties as a tradesperson |
What Expenses Can You Claim Under the LMD?
The LMD allows you to claim specific expenses related to your temporary relocation. Eligible LMD expenses fall into three main categories:
- Transportation expenses: Costs for one round-trip between your ordinary residence and the temporary lodging location for each eligible temporary relocation. This includes public transportation costs or vehicle expenses if using your own vehicle.
- Meal expenses: Costs for meals consumed during the round-trip between your ordinary residence and temporary lodging.
- Temporary lodging expenses: These are the costs for temporary accommodation while working at the temporary location, provided your principal residence remains available to you and is not rented out to anyone else during this period.
Eligible expenses include those incurred:
- During the current tax year
- Prior to February 1 of the following year
You can also claim expenses from a previous tax year if you have sufficient income from that same temporary work location in the current year.
LMD Eligibility Rules and Requirements
Beyond the basic eligibility criteria, there are a few additional rules regarding what expenses qualify under the LMD:
- Your ordinary and temporary addresses must be at least 150 km apart
- You must be working at the temporary location for employment purposes
- Your absence from your ordinary residence must exceed 36 consecutive hours
- Lodging expenses qualify only if your permanent home residence is not rented out during your absence
- Expenses cannot be reimbursed or covered by your employer
Additionally, the maximum LMD claim thresholds are:
- 50% of income is earned at the temporary work location
- $4,000 total per individual per tax year
What Records Must You Keep to Claim the LMD?
To substantiate your LMD claims, you need to maintain detailed records:
- Daily log of expenses, including receipts and cancelled cheques
- Transportation tickets and stubs
- Tenancy agreements and lodging invoices
- Credit card statements showing expenses
- Mileage log for the use of your personal vehicle
While you don’t need to submit these full expense records with your T1 personal tax return, you must keep them available in case the CRA asks to review them.
How is the Labour Mobility Deduction Claimed?
To claim the LMD, eligible tradespeople and apprentices must complete Form T777 Statement of Employment Expenses when filing their personal tax return.
Follow these four key steps:
Step 1: Track daily expenses using the records listed above
Step 2: Calculate your maximum eligible claim (see next section for details)
Step 3: Enter your LMD amount on Page 1, Line 11 of Form T777
Step 4: Submit T777 with your personal tax return
You can claim the LMD using your preferred tax preparation software or when filing your return directly with the Canada Revenue Agency (CRA).
How To Calculate Your Maximum LMD
Determining your maximum LMD involves four simple steps:
Step 1: Track expenses for each work period: Add up your total transportation, meals, and lodging costs for each period you relocated for work, keeping distance and time requirements in mind.
Step 2: Calculate 50% of temporary work income: Add up the employment income earned at the temporary location for each work period. Take 50% of this amount.
Step 3: Take the lower of the two amounts: Your maximum claim is the lower of your total expenses vs. 50% of temporary location income.
Step 4: Cap at $4,000: If your total deductions across all periods exceed $4,000 for the tax year, limit your claim to $4,000.
See the example calculation below:
| Calculation Components | Period 1 | Period 2 | Total |
| Total Expenses | $2,500 | $3,000 | $5,500 |
| 50% of Income | $3,000 | $1,500 | $4,500 |
| Lesser of Expenses vs. 50% Income | $2,500 | $1,500 | $4,000 |
In this example, $4,000 would be claimed as the total LMD across the two periods.
Can the LMD Be Combined With Other Deductions?
No, the LMD cannot be combined or claimed in tandem with other tax deductions for moving expenses.
However, any LMD amounts that cannot be claimed in a given tax year due to the 50% income cap can be carried forward to the following year.
How to Maximize Your Labour Mobility Deduction
To get the most from the Labour Mobility Deduction, consider the following 5 practical tips:
- Keep detailed records: Maintain organized documentation of all eligible expenses, including receipts, invoices, and a log of your travel.
- Plan your temporary relocations: When possible, coordinate your temporary work assignments to maximize eligible expenses within the annual limit.
- Understand the timing: Remember that expenses incurred before February 1 of the following year can be claimed for the current tax year.
- Track your income: Since the deduction is limited to 50% of your income from each temporary work location, keep accurate records of your earnings at each site.
- Consult a tax professional: If your situation is complex, consider seeking advice from a tax specialist familiar with the construction industry and the LMD.
By understanding and properly utilizing the Labour Mobility Deduction, Canadian tradespeople can significantly reduce their tax burden while pursuing work opportunities across the country.
The bottom line
Juggling work, family, and constant regional moves isn’t easy, but hopefully this guide has shown how Canada’s Labour Mobility Deduction can ease some financial strains.
Just be sure to keep thorough records, correctly calculate your maximum claim, and file Form T777 with your taxes. Refer to this guide or speak with a tax professional to ensure you receive the full deductions and tax relief available.
FAQs related to Labour Mobility Deduction
Does the LMD apply retroactively?
Yes, eligible tradespeople can claim expenses incurred as far back as January 1, 2022
What types of construction jobs qualify you for the LMD?
Eligible construction activities include building, excavation, renovation, demolition, installation, and repair projects
Can self-employed trade workers claim the LMD?
Yes, both salaried and self-employed tradespeople are eligible for the LMD if they meet the qualifying criteria.
Where do I enter my LMD expenses when filing taxes?
Eligible expenses get entered on Form T777 Statement of Employment Expenses, which accompanies your personal T1 tax return. Enter the LMD amount from Line 11 of the T777 onto Line 22900 of your T1.
Why can't I claim the moving expense deduction?
The LMD is specifically for temporary relocation costs, while the moving expense deduction relates to more permanent residence changes. You can claim one or the other, but not simultaneously.
Do travel rewards or points count as reimbursements under the LMD?
No, non-monetary incentives like free flights or hotel points earned from your expenses do not disqualify LMD claims. Only direct employer reimbursements would render those costs ineligible.
