What are multigenerational homes?
Multigenerational homes are households with at least two generations of adults. Have you noticed more and more families living together under one roof these days? It’s becoming super common, especially with folks who have aging parents or relatives who need a bit of extra care. With housing prices on the rise and the cost of living going up, multigenerational households are popping up all over Canada as a way for families to share expenses and save a bit of money.
Now, let’s talk about creating a secondary dwelling unit. If you’re wondering, “what is a secondary unit?,” it’s like a mini-home within your main home. It’s got its own entrance, bedroom, kitchen, and bathroom— totally self-contained.
But here’s where things get interesting. It can cost a pretty penny, right? Cue the multigenerational home renovation tax credit. It’s a solution to help with those renovation costs. Here’s what it’s all about.
What is the multigenerational home renovation tax credit?
The multigenerational home renovation tax credit is a new tax credit from the 2022 federal budget. It can help offset the costs of home renovations for the specific purpose of building a secondary dwelling unit for a qualifying relative.
Those expenses must have been incurred on or after January 1, 2023 to qualify. You can claim 15% on your renovation costs, up to a maximum of $7,500.
Who is eligible for the multigenerational home renovation tax credit?
To qualify for the MHRTC, you need to build a secondary dwelling unit for a qualifying individual who is:
- 65 years of age or older before the end of the taxation year in which the renovation takes place
- Between 18 and 64 years old before the end of the taxation year in which the renovation takes place and who qualifies for the disability tax credit
- The cohabiting spouse or common-law partner of the qualifying individual
- A parent, grandparent, child, grandchild, brother, sister, aunt, uncle, niece, or nephew of the qualifying individual and who is also at least 18 years old by the end of the year
Only one renovation cost may be claimed during the lifetime of each family member. This means multiple people cannot build units for the same relative and also claim the costs.
What is an eligible home renovation expense?
Eligible home renovation expenses include:
- Building materials
- Equipment rentals
- Labour or expertise provided by professionals, such as electricians, plumbers, or architects
- Permits
However, you cannot claim the following expenses. These are ineligible:
- Your own time, labour, or tools
- Outdoor maintenance or gardening
- Household appliances
- Security monitoring
- Expenses unaccompanied by receipts
Are home renovations tax deductible in Canada?
Yes, home renovations are tax deductible in Canada. Seniors over the age of 65 and people with disabilities can claim a deduction on their annual income tax return for upgrades to their primary residence. Eligible renovations must be intended to improve their accessibility and safety at home.
While both federal and provincial tax credits are available to offset the cost of home renovations, including in British Columbia, New Brunswick, and Quebec, there’s no real equivalent at the provincial or territorial level for the MHRTC, which is a federal tax credit.
What is the home renovation tax credit in Ontario?
The provincial home renovation tax credit is no longer offered in Ontario.
What is the home renovation tax credit in British Columbia?
If you are a resident of BC and live with a senior family member, you may be able to claim the BC home renovation tax credit.
You can claim up to $10,000 in eligible expenses, for a maximum credit of $1,000 per calendar year.
To qualify, you must meet the following criteria:
- Be a senior or live with a senior family member
- Be a resident of BC on the last day of the previous tax year
- Be claiming the federal government’s disability tax credit
- Renovations must be made to improve mobility or reduce risk of injury (examples include installing handrails or grab bars, or widening doorways for accessibility)
Can you claim renovations on your taxes in Canada in 2023?
Seniors, persons with disabilities, and their caregivers could be eligible to claim renovations on their taxes in the 2023 taxation year.
The multigenerational home renovation tax credit must be claimed in the same tax year the renovations were completed, on line 45355 of your T1 General Tax Form.
Document all of your invoices and receipts. Ensure they include the following information:
- Description of goods and services purchased or work performed
- Vendors’ names, business addresses, and goods and services tax/harmonized sales tax (GST/HST) numbers
- Dates of purchase, delivery, and completion
Moving the parents in with you? Claim those credits!
Turning a house into a multigenerational home can be expensive. Now that you know the MHRTC details, you can claim these credits when you file your tax return and get up to $7,500 back.
