Canada’s Labour Mobility Deduction (LMD) was expanded for the 2026 tax year. The annual limit rose from $4,000 to $10,000, and the distance threshold dropped from 150 km to 120 km.
These changes were enacted in Bill C-30, which received royal assent on June 18, 2026, and apply for the 2026 tax year and later. Beginning in 2027, the $10,000 limit will be indexed to inflation.
The Labour Mobility Deduction was introduced for the 2022 tax year. It allows eligible tradespeople and apprentices in construction to deduct certain expenses when they have to relocate temporarily for work at construction sites in Canada.
Tax experts stress that October is the critical month to begin this year-end planning, as the final trading deadline is December 30, 2025. You must act early to avoid the Canada Revenue Agency’s (CRA) Superficial Loss Rule, which prohibits buying back the sold asset within 30 days.
What This Means for You
- You may be able to deduct more in eligible relocation expenses because of the higher cap.
- More workers may qualify because the distance test is 120 km instead of 150 km.
- The deduction reduces your taxable income; your actual tax savings depend on your marginal tax rate.
What Determines Your Claim
Rule 1: Meet the Distance Requirement
Your temporary lodging must be at least 120 km closer to the temporary work location than your ordinary residence (your main home). Other core eligibility rules still apply:
- Your work duties must keep you away from your ordinary residence for at least 36 hours.
- The site must be outside the locality where you normally work.
- To claim temporary lodging expenses, you must maintain your ordinary residence as your principal place of residence throughout the temporary relocation, and it must remain available for your occupancy and not be rented to any other person during that period.
Rule 2: Claim Eligible Expenses
Eligible costs include:
- Temporary lodging.
- Transportation for one round trip between your ordinary residence and your temporary lodging for each eligible temporary relocation.
- Meals consumed during that round trip.
If you receive a non‑taxable allowance from your employer for relocation expenses, only the portion of your eligible expenses that exceeds that allowance can be claimed under the LMD. For example, $9,000 in expenses offset by a $3,000 non‑taxable allowance leaves $6,000 to claim.
This deduction is for eligible employees, not self‑employed contractors.
Rule 3: Stay Within the Income Limit
Your claim cannot exceed 50% of the employment income earned at that site. For example:
- Earning $18,000 caps your maximum claim at $9,000.
- An $8,000 claim requires at least $16,000 in site income.
- In general, you need at least $20,000 in site income to claim the full $10,000 limit.
Where You Stand
Employed tradespeople calculate the claim on Form T777 and report it on line 22900 of your return. Keep all receipts and records for at least six years. The CRA may ask to see them.
The CRA does not require you to file a signed Form T2200 with your return to claim the Labour Mobility Deduction, although you must keep supporting records in case the CRA requests them.
Small details can change your final numbers completely. At Legend Fusions, we prepare T1 returns and T777 claims to make sure Canadian construction workers get every claim right.
Jeffrey Ross
Jeffrey Ross is an experienced tax accountant focused on US-Canada cross-border taxation, with over three years in the industry, including a key role as client manager at a Canadian tax firm. He provides expertise in corporate and personal tax planning, specializing in non-resident tax, capital gains, CRA and IRS compliance, and retirement planning. Known for his personalized approach, Jeffrey is dedicated to guiding clients with clear, practical advice tailored to complex tax scenarios, aligned with the evolving tax laws.