Overview

The Government of Canada’s 2026 Spring Economic Update introduced a significant enhancement to the Labour Mobility Deduction (LMD), a measure originally designed to support tradespeople who incur temporary relocation costs for work. The update increases the maximum annual deduction available, expanding tax relief for eligible workers and improving labour mobility across the country.

This change is particularly relevant for skilled trades, construction workers, and employers who rely on mobile labour to meet project demands.

 

What Is the Labour Mobility Deduction?

The Labour Mobility Deduction allows eligible tradespeople and apprentices to claim certain travel and temporary lodging expenses when they relocate for temporary work assignments. The deduction helps offset out-of-pocket costs that are not reimbursed by employers.

Eligible expenses typically include:

• Temporary lodging

• Meals

• Transportation to and from the temporary work location

• Travel between home and the temporary lodging site

 

What Changed in 2026?

The 2026 Spring Economic Update announced an increase to the maximum annual deduction, reflecting rising costs of travel and accommodation across Canada.

Key Changes

• Higher annual maximum claim amount (indexed to inflation going forward)

• Expanded eligibility criteria for certain categories of tradespeople

• Updated documentation requirements to streamline the claim process

While the government has not yet released the final legislative wording, the update confirms that the enhanced deduction will apply beginning with the 2026 tax year.

 

Why the Increase Matters

The construction and skilled trades sectors continue to face labour shortages nationwide. By increasing the LMD, the government aims to:

• Reduce financial barriers for workers accepting temporary assignments

• Support major infrastructure and housing projects

• Improve labour supply flexibility across provinces and territories

For many workers, the enhanced deduction may result in hundreds of dollars in additional tax savings each year.

 

Who Benefits?

The increase primarily benefits:

• Red Seal tradespeople

• Apprentices in eligible programs

• Workers who regularly travel for construction, maintenance, or project-based work

• Employers who rely on mobile labour forces

Workers must still meet the CRA’s eligibility criteria, including maintaining a primary residence and working at a temporary location at least 150 km away.

 

What Employers and Workers Should Do Now

For Workers

• Keep detailed records of travel, lodging, and meal expenses

• Retain receipts and contracts showing temporary work assignments

• Confirm eligibility with a tax professional if unsure

For Employers

• Review internal reimbursement policies

• Communicate the updated deduction to mobile employees

• Consider how the enhanced LMD may support recruitment and retention

• Determining eligibility for the Labour Mobility Deduction

• Optimizing tax filings for tradespeople and apprentices

• Advising employers on compliance and workforce planning