Compliance
Labour Mobility Deduction: Expanded for Tradespeople in 2026
For construction tradespeople traveling for work, the Labour Mobility Deduction has been strengthened—learn how distance, deduction limits, and eligibility have changed.
By NomadicTax Research Team • 5-8 min read • August 24, 2026
## Overview of Recent Changes
- The **Labour Mobility Deduction (LMD)**, under paragraph 8(1)(t) of the Income Tax Act, has seen two major updates for the **2026 and later taxation years**:
1. The **annual deduction limit** has increased from **$4,000 to $10,000**, and will be **indexed to inflation** starting after 2026.([fin.canada.ca](https://fin.canada.ca/drleg-apl/2026/nwmm-amvm-2-0426-n-eng.html?utm_source=openai))
2. The **distance threshold** for eligible temporary relocation has been reduced from **150 km to 120 km**, meaning more relocation situations now qualify.([fin.canada.ca](https://fin.canada.ca/drleg-apl/2026/nwmm-amvm-2-0426-n-eng.html?utm_source=openai))
## Who Qualifies
To claim LMD, you must be an **eligible tradesperson or apprentice in construction activities** who undertakes an **eligible temporary relocation**—including:
- Being away from your ordinary residence for at least **36 hours**
- Incurring eligible expenses like **round-trip transportation to temporary lodging**, **lodging costs**, **meals during travel**, etc.([canada.ca](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4044/employment-expenses.html?utm_source=openai))
- The temporary lodging must be **at least 120 km closer** to work compared to your ordinary residence. The change in distance requirement makes more relocation setups qualify.([fin.canada.ca](https://fin.canada.ca/drleg-apl/2026/nwmm-amvm-2-0426-n-eng.html?utm_source=openai))
## How Much You Can Deduct & When
- Deduction cap is now **$10,000/year** (inflation-indexed thereafter). Applies to all relocations combined.([fin.canada.ca](https://fin.canada.ca/drleg-apl/2026/nwmm-amvm-2-0426-n-eng.html?utm_source=openai))
- The deduction per relocation is limited to **50% of income from construction activities at the temporary work locations**. If eligible expenses exceed that amount, or if income at those locations is limited, the deduction can be constrained.([canada.ca](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4044/employment-expenses.html?utm_source=openai))
## Practical Examples
- **Qualifying via reduced distance threshold**: Linda lives in a small town 140 km from her temporary work site. She takes temporary lodging 20 km from the work site. Under the old rule with 150 km threshold, she’d be ineligible. Under the new 120 km threshold, she qualifies.
- **Increased deduction limit scenario**: Alex, a welder apprentice, has multiple temporary relocations in 2026. Total eligible temporary relocation expenses $9,000, construction income from those locations $18,000. He can claim the full $9,000 (since it’s under 50% cap for each relocation) thanks to the $10,000 overall limit.
## Tips to Maximize Benefit
- Keep detailed **distance, lodging, travel, and meal records**. Distance measured by shortest public route. Without this, CRA audits may disallow the deduction.([canada.ca](https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-1-individuals/folio-3-family-unit-issues/income-tax-folio-s1-f3-c4-moving-expenses.html?utm_source=openai))
- Split claims by relocation where feasible to fit under the 50%-of-income cap.
- Confirm that lodging expenses, travel from ordinary residence to lodging, and meals during the travel period are properly documented.
## Limitations and Caveats
- Only expenses directly linked to temporary relocation for construction work qualify.
- If employer reimburses certain expenses, your deduction must be adjusted.
- Claims with insufficient income at temporary locations may result in limitation under the 50% cap.
- As with all deductions, retain receipts and maintain demonstrable proof of eligibility.
**Bottom line**: Tradespeople now have broader eligibility and greater deductions under the LMD. Especially with the lower distance threshold and higher cap, you could see meaningful tax savings in 2026 if you travel for construction work.