Filing Your Return -> Northern Residents Deduction
Northern Residents Deduction Line 255
Income Tax Act s. 110.7
The Northern Residents Deduction is a deduction from income, not a tax credit, so tax is saved at your marginal tax rate.
There are two parts to the northern residents deduction - the residency deduction, and the travel deduction.
The northern residents deduction can be claimed by every member of a household if they have lived in one or more prescribed zones for a continuous period of at least six consecutive months, either beginning or ending in the tax year for which a tax return is being filed. The only provinces which do not have any prescribed zones are New Brunswick and Prince Edward Island.
There are two types of prescribed zones:
- Zone A, northern zones, and
- Zone B, intermediate zones.
- Zone A: $11 per day (x 365 days = $4,015 per year)
- Zone B: 50% of Zone A amount = $5.50 per day (x 365 days - $2,007.50 per year)
Note that the $11 per day is not indexed for inflation, but was increased from $7.50 59 $8.25 in 2008, and to $11 in 2011.
An additional residency amount of $11 or $5.50 per day can be claimed if you maintained and lived in a self-contained dwelling (complete and separate living unit with kitchen, bathroom, sleeping facilities, and own private access) in a prescribed zone during the six continuous months, and you are the only person in your household claiming the basic residency amount. If only one person in the household has taxable income, there would be no need for anyone else in the household to claim the residency amount.
After totalling the basic and additional residency amounts, deduct the following:
- amounts from box 31 of your T4 or box 124 of your T4A that represent the non-taxable benefits for board and lodging at a special work site, unless the special work site is located 30 kilometres or more from the nearest boundary of any population centre that has a population of at least 40,000 individuals.
The maximum residency deduction is equal to 20% of your net income from line 236 of your tax return.
If you move to a prescribed zone near the end of the year, say December 1st, then you will not be able to claim the northern residents deduction when you file your tax return by April 30th in the following year. However, once you have lived in the prescribed zone for 6 continuous months, you can then change your previously filed return to claim the deduction for the 31 days in December.
If you are absent from the prescribed zone for vacations, medical leave, or temporary work assignments, this may not affect the continuity of your qualifying 6 month period. See RC4650 frequently asked questions for more information.
In order to claim this deduction, you must meet all of the following criteria:
- you are eligible for the residency deduction;
- you have received a travel benefit from your employer;
- the travel benefit has been included in your taxable income;
- you and your employer are not related; and
- the travel was for vacation, family, or medical reasons, was not required by your employer or related to your employment, and started from a prescribed zone.
If the above criteria are met, then travel expenses of air/train/bus fares, vehicle expenses, meals, hotel/motel accommodations, camping fees, and other incidental expenses ( taxis, road tolls, ferry fare) for you or others in your household can be claimed. However, the maximum amount that can be claimed is the least of:
- the value of the travel benefit received from your employer and included in your income;
- the actual amount spent on the travel; and
- the lowest return airfare available at the time of the trip between the airport closest to your residence and the nearest designated city to that airport. See Form T2222 (link below) for the designated cities.
Canada Revenue Agency Resources
Revised: September 20, 2018
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