Depending on the location of your permanent home, you may qualify for the Northern Residents Deduction on your personal income tax return.
The steps to determine if you qualify for the NRD are as follows:
Step 1 – Your permanent resident location
There are two levels of locations that qualify for the Northern Residents Deduction:
- Prescribed northern zones ( Zone A)
- Prescribed intermediate zone (Zone B)
Canada Revenue Agency (CRA) has a webpage illustrating which locations in Canada qualify as Zone A or Zone B.
Step 2 – Length of time residing in the prescribed zones
You must have resided in either Zone A or Zone B for a continuous period of at least 6 months to qualify for the Northern Residents Deduction.
If you only worked in a remote location and your principle place of resident remained the same in a non-prescribed zone, then you will need to look into the Employment at Special Work Sites or Remote Locations income tax bulletin.
If you do live in Zone A or B and have lived there continuously for 6 months or more in one year, you likely qualify for the Northern Residents Deduction.
There are two portions of the Northern Residents Deduction that apply to each person:
Basic residency is available for every person in a household to claim at a minimum.
Additional residency is available for those who live alone in a household. It is also available for a household who has decided that only one person will claim both the basic and additional residency amounts and all others in the household will claim neither.
Tax Planning Opportunity
There is some room for tax planning while completing your personal tax return to determine which of these options is the most advantageous for a household. Please note that if more than one person in the household claims both basic and additional residency amounts, CRA can deny both amounts. So it is crucial when living with others to discuss what you plan to claim before any tax returns are filed.
If you would like more information or have any questions, feel free to contact us at 780.466.6204, or click here to send us an email.
Thanks to Jean Dubois of KWB Chartered Accountants for providing this content.