If you live or work in Northern Canada you may qualify for the Northern Living Allowance.
The Canadian government recognizes the higher cost of living for people in the Northern part of the country. As a result we have two northern zones. If you live in one of those zones for a minimum amount of time you may qualify for some specific tax relief.
Specific locations and communities are listed by Revenue Canada for each province. To determine if your location is in a prescribed zone simply click the following link – Places In Prescribed Zones, select your province and see if your location is listed.
Once you’ve determined your location is in a prescribed zone, now you have to determine if you qualify for the Northern Living Allowance. Basically, the rule is you must live in the zone for a continuous period of at least six months. The six months can begin in the previous year but only the allowable expenses from the current year will be used to determine your tax allowance.
As I mentioned earlier, there are two Northern Zones:
- Prescribed Northern Zone A – If you live in this zone you are allowed to claim the full Northern Resident deductions.
- Prescribed Intermediate Zone B – If you live in this zone you are allowed to claim 50% of the full Northern Resident deductions.
The form we use to claim the Norther Living Allowance is the T2222. Here you will list your location and how many days you lived in the zone as well as any money paid to you by an employer as a living allowance (this will be found on your T4 slip box 31 or 124.)
The second part of the form deals with specific expenses you may have incurred. Here you will list all your trips out of the prescribed zone and the reason. You will also include your cost of travel and the lowest fare plane ticket from the airport closest to you, to the city designated by Revenue Canada for your province.
The totals are calculated and your allowable deduction is determined.
It is important to have supporting documentation when you make this claim (as with any claim you make on your tax return). Revenue Canada will often ask to see your supporting documentation.
Claiming the Northern Living Allowance is not particularly hard or complicated. Simply read the T2222 Northern Living Allowance information sheet and be honest.
Here are some other tax related articles you may find helpful: