Your Employer Is Relocating You and Covering the Loss on Your House: A Line-by-Line Tax Reading of the Relocation Package
A relocation package puts the commission, the movers and the loss-on-sale top-up on one page. The Income Tax Act and CRA’s employer guide sort them into different rules, and only some of them end up on your T4.
If my employer relocates me and reimburses the loss on selling my house, is that reimbursement taxable?
It turns on one measurement. If your old home is at least 40 km farther from your new work location than your new home is (an eligible relocation under ITA s.248(1)), only half of the cumulative amount above $15,000 is a taxable benefit (s.6(20)). If it isn’t, the full amount is (s.6(19)). Commission and legal fees on the sale are a different line: CRA lists them among moving expenses that are usually not a taxable benefit.
Source: Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), ss. 6(19)–(22) and 248(1) “eligible relocation” (Justice Laws, consolidated text retrieved 2026); CRA Guide T4130, Employers’ Guide – Taxable Benefits and Allowances (Rev. 25)
Picture two lines sitting next to each other on a relocation schedule. One reads “Real estate commission on sale of current residence – paid by Company.” The one below it reads “Loss-on-sale protection – up to $50,000.” Both exist because you are selling a house so you can take a job somewhere else. For tax purposes they belong to different rulebooks, and one of them can reach your T4 while the other is described by CRA as usually not a taxable benefit.
I’m Arthur Zhao, a real estate broker in Ontario. I’m not your accountant, and this isn’t tax advice for your file. What I can do is walk through the kinds of lines a package can contain, one at a time, and show which provision of the Income Tax Act or which part of CRA’s employer guide each one runs into. The dollar figures in my examples are illustrative arithmetic, not anyone’s actual package.
The three references you are reading the package against
Every line in a relocation package eventually gets sorted by one of three sources:
- CRA’s employer guide
T4130(Rev. 25), section “Moving expenses and relocation benefits.” It lists moving costs an employer can pay or reimburse that are usually not a taxable benefit, and says costs it doesn’t list are generally a taxable benefit. - Income Tax Act ss. 6(19) to 6(22), which deal only with payments for a housing loss — the drop in value of the home you are leaving.
- Income Tax Act s.62, which governs what you can deduct for moving costs your employer did not cover.
The package itself doesn’t decide which bucket a line falls into; the description of what the money pays for does.
Line: house-hunting trip, the move itself, movers and storage
These sit in T4130’s list of moving expenses that are not a taxable benefit when an employer transfers an employee or the employee takes a job away from their former residence. The list names house-hunting trips to the new location, including child care and pet care while you are away; travelling costs with a reasonable amount for meals and lodging; and the cost of transporting or storing household effects. It also includes temporary living expenses while you wait to move into the new permanent home, and legal fees and land transfer tax to buy the new residence.
CRA’s own wording is that these amounts are “usually” not a taxable benefit, and amounts must be reasonable. That is the guide’s language, not a blanket exemption, so a line that stretches past what the list describes is a question for the payroll department and your adviser.
Line: selling costs on the old home — commission, legal fees, mortgage discharge penalty
T4130’s non-taxable list includes the cost of selling the old residence, including advertising, notarial or legal fees, real estate commission, and mortgage discharge penalties.
It is worth seeing why this is a separate track from the loss top-up. The housing-loss definition in ITA s.6(21) is built from three inputs: your adjusted cost base, the highest fair market value in a six-month window, and your sale proceeds or the fair market value. Commission and legal fees are not inputs to that formula. In T4130 they appear in the moving-expenses list, a different paragraph from the one on housing loss. So an employer paying your listing brokerage is, on CRA’s list, a moving expense; it is not part of the loss amount that gets tested against $15,000.
Line: carrying costs while the old home sits unsold
If the package keeps paying the bills on your old house after you move, T4130’s list includes property taxes, heat, hydro, insurance, and grounds maintenance costs to keep up the old residence after the move — with a condition attached: when all reasonable efforts to sell it have not been successful.
Two things follow from the wording. First, the condition is about your sale efforts, so a listing that isn’t really on the market doesn’t fit the description. Second, the item names five categories. Mortgage interest is not one of them in the list as published in Rev. 25, and CRA says moving costs it does not list are generally a taxable benefit. How your employer codes a mortgage-interest line is a payroll question to ask before you sign, not after.
Line: loss-on-sale protection — what the Income Tax Act counts as a “housing loss”
This is the line ss. 6(19)–(22) were written for. The starting point is not simply what you paid. Under s.6(21), the base is the greater of (a) your adjusted cost base (ACB) and (b) the highest fair market value of the home within the six-month period ending at the time the loss is measured. From that you subtract (c) the lesser of your sale proceeds and the fair market value at that time, if you dispose of the home before the end of the first taxation year that begins after that time; otherwise (d) the fair market value at that time.
Illustrative arithmetic (my numbers): ACB $650,000. Highest fair market value in the six-month window $690,000. Fair market value at the measuring time $660,000. You sell for $655,000 within the window in (c).
Base = greater of $650,000 and $690,000 = $690,000.
Subtract the lesser of $655,000 and $660,000 = $655,000.
Housing loss = $35,000 — even though you sold for $5,000 more than you paid.
What happens to an employer payment for that $35,000 depends on whether it is an eligible housing loss:
- Not eligible (s.6(19)): the amount paid is deemed an employment benefit — all $35,000.
- Eligible (s.6(20)): the benefit is one half of the cumulative amount paid above $15,000 — ½ × ($35,000 − $15,000) = $10,000.
According to the Income Tax Act as consolidated on Justice Laws (2026), the $15,000 figure is written into s.6(20) itself; the section contains no indexing language.
ℹ️Section 6(21) measures the loss “at that time” and looks back six months from it, but the provision doesn’t pin “that time” to a named event such as the offer date or closing. Which date applies to your file is a question for your tax adviser; my example above simply assumes one.
The test hiding inside that line: 40 km, measured to the new work location
A housing loss is “eligible” under s.6(22) when it relates to an eligible relocation and the home is the one you designate. The s.248(1) definition requires that the move is to let you work (or carry on business, or attend post-secondary full-time) at a new work location; that you ordinarily lived at the old residence before and the new residence after; that both are in Canada (with an exception for someone absent from but resident in Canada); and, in paragraph (d), that the distance between the old residence and the new work location is not less than 40 kilometres greater than the distance between the new residence and the new work location.
Illustrative distances:
- Old home 95 km from the new office, new home 20 km from it: you end up 75 km closer. That clears 40.
- Old home 50 km from the new office, new home 15 km from it: 35 km closer. That doesn’t, no matter how far apart the two houses are.
Section 6(22) also says no more than one residence may be designated per eligible relocation. If a household is selling two properties in the old city, only one of them can carry the eligible-housing-loss treatment for that move.
⚠️The 40 km in the eligible-relocation definition is not the distance between your old house and your new one. It is how much closer your new residence is to the new work location than your old residence was.
Line: how the top-up is paid — one cheque or instalments
Section 6(20) works on a running total: the amounts paid “in the year or in a preceding taxation year,” less what was already included for that loss in earlier years. The $15,000 is used once across the whole loss, not once per year.
Illustrative arithmetic (continuing the $35,000 eligible loss): the employer pays $20,000 this year and $15,000 next year.
Year one: ½ × ($20,000 − $15,000) = $2,500.
Year two: ½ × ($35,000 − $15,000) − $2,500 = $7,500.
Total over two years: $10,000 — the same as a single payment. Splitting changes which year the income lands in, not the total. If the first instalment were $15,000 or less, nothing from it would be included in year one.
According to CRA’s T4130 (Rev. 25), when the payment is spread over two years the employer includes an amount on the T4 for each year; the guide’s own example pays a $65,000 eligible loss as $30,000 and $35,000 and arrives at $7,500 and $17,500.
💡 My personal judgement: the decision that does the most to set how the loss top-up is taxed is made in the new city, not the old one. Paragraph (d) of the 40 km test compares your old home with your new residence, both measured to the new work location. Where you choose to live after the move is part of the tax answer on the house you left behind — worth knowing while you are still deciding where that will be.
What the package doesn’t cover stays with you — and doesn’t become a deduction
If the package has no loss line, or caps it below your loss, the uncovered part does not turn into a tax write-off. Under ITA s.40(2)(g)(iii), a loss from disposing of personal-use property is nil, so a loss on selling the home you lived in can’t be claimed as a capital loss.
On the moving-cost side, s.62(1)(a) lets you deduct eligible-relocation moving expenses only to the extent they were not paid on your behalf by your employer, and s.62(1)(d) requires any reimbursements or allowances you received for those expenses to be included in income. In plain terms: a cost your employer covers can’t also be your deduction. Which of your own leftover moving costs qualify under s.62 is a separate topic with its own rules.
Relocating for a New Job? A Stage-by-Stage Map of Which Home-Sale and Purchase Costs Count as Moving Expenses in Canada →Sold an Ontario Rental at a Loss? The Tax Rules Treat the Land and the Building as Two Separate Losses →Capital Gains Tax When You Sell a Home in Ontario: The 2026 Rules →Ontario Mortgage Guide →
Frequently Asked Questions
Does it matter if my employer pays the loss straight to my lender or lawyer instead of to me?
No. ITA s.6(19) and s.6(20) both apply to amounts paid “to or on behalf of” the taxpayer, so a payment routed to your mortgage lender or lawyer is treated the same as one deposited in your account. Whether it is fully taxable or only half of the excess over $15,000 still depends on whether the loss is an eligible housing loss.
The house is in my spouse’s name, not mine. Is the employer’s loss payment still my income?
Under s.6(19) and s.6(20), payments to a person who does not deal at arm’s length with you count as your employment benefit, and s.251 treats people connected by marriage or common-law partnership as related, which deems them not to deal at arm’s length. Section 6(21) also lets the adjusted cost base be the one held by that other person. So the payment is measured as your benefit even though title is in your spouse’s name.
We are selling two homes in the old city. Can both losses get the $15,000 treatment?
Not for the same move. Section 6(22) of the Income Tax Act says no more than one residence may be designated for each eligible relocation, so only one home’s loss can be the eligible housing loss. A payment for a loss on the other property would fall under s.6(19), where the full amount is a benefit.
My employer is paying property tax and utilities on my old house until it sells. Is that taxable?
CRA’s T4130 (Rev. 25) lists property taxes, heat, hydro, insurance and grounds maintenance on the old residence after the move as moving expenses that are usually not a taxable benefit, but only when all reasonable efforts to sell it have not been successful. Costs outside that list, such as mortgage interest, are not named in it, and CRA says unlisted moving costs are generally a taxable benefit.
Will the $15,000 threshold go up with inflation?
Nothing in the current text provides for that. The $15,000 is a fixed figure written into s.6(20) of the Income Tax Act, and the provision has no indexing language. A change would require an amendment to the Act.
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