Labour Mobility Deduction 2026: Claim Up to $10,000

Quick Answer

Why Trades Travel Just Got a Bigger Tax Break

If your work takes you to construction sites far from home, the 2026 tax year brought a useful change. Under Bill C-30, the federal government raised the annual cap on the Labour Mobility Deduction from $4,000 to $10,000 and lowered the distance test from 150 to 120 kilometres. More tradespeople now qualify, and those who already qualified can write off a much larger share of their travel, lodging, and meal costs.

The rules on who can claim, what counts, and how the deduction interacts with other provisions are still strict. Get the details right and you can meaningfully reduce your tax bill. Get them wrong and the Canada Revenue Agency (CRA) can disallow the entire claim. This article walks through what changed, who qualifies, and how to file on your 2026 return.

Pick Your Path

What Changed Under Bill C-30

The Labour Mobility Deduction was originally introduced in the 2022 tax year to help tradespeople offset the cost of travelling to construction projects far from home. Under the original rules, eligible workers could deduct up to $4,000 per year in relocation expenses, provided their temporary lodging was at least 150 kilometres closer to the job site than their permanent residence.

The higher $10,000 cap gives most travelling tradespeople meaningful room to claim actual costs, which for a multi-month relocation regularly exceeded the old $4,000 ceiling. The lower 120 kilometre distance test opens the deduction to workers who previously fell just short, for example a tradesperson based in Hamilton working on a project in Guelph.

The other core rules stayed the same, including the 50% of employment income cap at the temporary work location, which we cover in the eligibility section below.

Are You Eligible?

The CRA uses four tests to determine whether you qualify. All four must be met for each relocation you plan to claim.

Eligible tradesperson. The Income Tax Act defines this as an employed tradesperson or apprentice performing construction activities such as building, excavation, installation, demolition, and renovation work. You must be an employee receiving employment income, not a self-employed contractor.

Ordinary residence in Canada. The home where you normally live and to which you plan to return. You cannot claim the deduction if the temporary work location has effectively become your main home.

Temporary relocation. You moved to the location specifically to perform your employment duties, and you were away from your ordinary residence for at least 36 hours.

Distance test. Your temporary lodging must be at least 120 kilometres closer to the temporary work location than your ordinary residence. Under the previous 150 kilometre rule, many local relocations were excluded.

If you are unsure whether you are an employee or a contractor, read our guide on worker classification rules before you file.

What Expenses Can You Claim?

Three categories of expenses can be claimed under the Labour Mobility Deduction.

Transportation covers one round trip between your ordinary residence and your temporary lodging for each eligible relocation. That includes airfare, rail, bus, or the cost of using your own vehicle at CRA-recognized rates. If you drive, keep a mileage log.

Temporary lodging covers the actual cost of the accommodation used during your relocation. Hotel bills, short-term rental invoices, and lease agreements typically qualify, provided the accommodation is genuinely temporary and your ordinary residence remains available to you.

Meals cover food expenses during the qualifying round trip. You can use the detailed method with actual receipts or the simplified flat-rate method. The CRA publishes the flat-rate amount each year.

Expenses covered by an employer’s non-taxable allowance cannot be claimed. Neither can expenses you claim as moving expenses on line 21900. The same dollar cannot be deducted twice.

How to Claim the LMD, Step by Step

The filing sequence is straightforward once you know where each number goes.

1. 1
   Gather documentationCollect daily expense receipts, transportation records, lodging invoices, and, if you used your own vehicle, a mileage log showing the route from your ordinary residence to your temporary lodging.
2. 2
   Confirm eligibilityCheck each relocation meets all four tests. The 120 kilometre distance rule is easy to misread. The measurement is between your ordinary residence and each temporary work location, using the temporary lodging as the reference point.
3. 3
   Complete Form T777Fill out the LMD calculation on page 2 of Form T777. This walks through eligible expenses per relocation, applies the 50% employment income cap at each temporary location, and stops the total at $10,000 for 2026.
4. 4
   Transfer to line 22900Move the calculated amount to line 11 of page 1 of the T777, then carry your total employment expenses to line 22900 of your T1 return.
5. 5
   Retain records six yearsKeep every receipt, log, and invoice for at least six years. The CRA does not require you to file receipts with your return, but you must produce them on request.

For a detailed audit-readiness checklist, see our guide on how to prepare for a CRA audit.

A Worked Example

Consider Maria, a Toronto-based electrician. She takes a four-month contract at a project 180 kilometres from home. Her employer provides no travel allowance. Over four months she spends $5,200 on temporary lodging, $2,700 on meals during her qualifying round trip, and $1,600 on transportation. Her employment income at the temporary location totals $32,000.

Under the previous rules, her deduction would have been capped at $4,000, even though her actual eligible expenses totalled $9,500. She would have effectively lost roughly $5,500 in unclaimed expenses.

Under the 2026 rules, the 50% income cap on her $32,000 works out to $16,000, above her actual expenses. The $10,000 annual ceiling is also above her expenses. Maria can therefore claim the full $9,500. At a typical Ontario marginal tax rate, that generally translates into a materially larger refund than the pre-2026 rules would have allowed. Actual results depend on the taxpayer’s specific situation.

Common Mistakes to Avoid

Eligible tradespeople sometimes lose the deduction to a filing error. Watch for these traps.

• →Assuming self-employed contractors can claim the LMD. The deduction is only for employees who receive a T4 from a construction employer.
• →Ignoring the 50% of employment income cap at the temporary work location. Even under the $10,000 ceiling, this second cap can limit your claim.
• →Double-claiming between the Labour Mobility Deduction and the moving expenses deduction on line 21900. The same expense cannot appear under both.
• →Misreading the 120 kilometre distance rule. The distance is measured between your ordinary residence and each temporary work location, using the temporary lodging as the reference point.
• →Discarding receipts, mileage logs, or hotel invoices before the six-year records retention window closes.
• →Claiming expenses your employer already reimbursed through a non-taxable allowance. Only unreimbursed amounts are deductible.
• →Forgetting the 36-hour minimum away-from-home requirement, which disqualifies same-day and overnight-only trips.

If you receive business income as a self-employed contractor and need a refresher on the deduction path that applies to you, our guide on tax deductions for sole proprietors covers the essentials.

Frequently Asked Questions

The Bottom Line

The 2026 changes are the most tradesperson-friendly update in the deduction’s short history. Raising the cap from $4,000 to $10,000, and lowering the distance test by 30 kilometres, expands both who qualifies and how much they can claim. The eligibility rules are still specific, and a filing error can cost the entire deduction.

Sources & References

1. Bill C-30, Spring Economic Update 2026 Implementation Act (Parliament of Canada): https://www.parl.ca/legisinfo/en/bill/45-1/c-30
2. Legislation passes to implement measures from the Spring Economic Update 2026 (Department of Finance Canada, June 19, 2026): https://www.canada.ca/en/department-finance/news/2026/06/legislation-passes-to-implement-measures-from-the-spring-economic-update-2026.html
3. Guide T4044 Employment Expenses (Canada Revenue Agency): https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4044/employment-expenses.html
4. Income Tax Act, paragraph 8(1)(t) and subsection 8(14) (Justice Laws Website): https://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-8.html
5. Spring Economic Update 2026: Tax Measures Supplementary Information: https://budget.canada.ca/update-miseajour/2026/report-rapport/tm-mf-en.html
6. Form T777 Statement of Employment Expenses (Canada Revenue Agency): https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t777.html