What is Canada’s Home Renovation Tax Credit

Posted On September 15, 2022

By N. Balani

What is a tax credit?

In the 2022 Federal Budget, several new tax credits were introduced for all Canadians. 

A tax credit is an expense that can be partially reimbursed by the provincial or federal government and allows you to deduct the amount from your income tax. If you do not use the entire tax credit amount in that specific year, you can carry it over to the next year in most cases. 

It should be noted that your spouse or common-law partner can share the credits.  One of the more recent credits is the home renovation tax credit.

What are the Federal home renovation tax credits?

Under the home renovation credit, you can make changes and renovations to your home under different categories, which all qualify for deductions by the Canada Revenue Agency. Some of the more recent ones are the Home Accessibility tax credit and the Multigenerational Home Renovation tax credit (announced in the Budget of 2022 with effect from 2023).

Home Accessibility tax credit

Until last year, the tax credit offered a non-refundable tax credit of 15% up to a maximum credit of $10,000. However, with effect from 2023, the federal government has increased the amount to $20,000 with a total possible credit of $3,000. 

The point to be noted is that the amount is non-refundable, i.e., the money will not be added to your tax refund; it will just reduce the amount you owe on a tax return.

For the Home Accessibility or Disability tax credit, eligible renovation expenses are broadly described as any that makes the home more accessible and functional for a disabled or senior resident to access all sections of the house.

In general, anything that reduces the risk of harm while entering or moving within the home. The expenses incurred under this tax credit apply only to a Canadian resident’s principal residence.

Multigenerational Home Renovation tax credit

To qualify for the Multigenerational Tax Credit, the homeowner must meet specific eligible criteria. For example:

The upgrades must be for your primary residence and 

• The homeowner must have a qualifying relationship with a senior over 65 living   in the same home
• The costs must meet the eligibility requirements

The idea of multigenerational homes is becoming more popular with Canadians as it is getting increasingly difficult for young couples to buy their own homes with tight supply in the housing market and affordability getting more out of reach. 

These homes may not be accessible to the elderly or disabled – hence the idea of the tax credit for the home renovations required was adopted.

This proposed credit will give 15% in a non-refundable tax credit on eligible home renovation expenses up to $50,000. It is a substantial renovation tax rebate. It is helpful for more significant renovations; for example, additional suites on existing property for living space.

This credit is limited to a qualifying individual like closest family members or relatives, for example, parents, grandparents, grandchildren, or siblings.

The tax credit is relatively new, and the eligible expenses may evolve until 2023. As these are significant renovations, it is better to wait till 2023 or consult a tax professional before upgrading.

What qualifies under home renovation tax credits?

Let us examine what can qualify under home renovation as an eligible expense. Home renovations that increase accessibility and safety around the homes. Improvements include installation of stairlifts, wheelchair ramps,

railings, automated door openers, and switches, widening doors to facilitate movement of wheelchairs, etc., and installation of bathroom fixtures to accommodate seniors or people with disabilities, just to name a few of the most common renovations. All of these are eligible for a claim on your tax returns.

What are the provincial tax credits for renovations?

Apart from the Federal tax credits, some provinces in Canada offer additional home renovation tax credits.

British Columbia Home Renovation Tax Credit

The province of British Columbia offers a home renovation tax credit for seniors and people with disabilities or a family member living with the senior doing the renovations on their behalf.

The province offers a maximum credit of 10% of expenses incurred up to $10,000 or up to $1,000. Of course, this amount is much lower than the Federal benefit, but it helps seniors save money on expenses incurred for qualifying renovations. Unlike some of the other credits, this is a refundable credit, i.e. It will be issued as a refund on your income tax returns by the Canada Revenue Agency.

Saskatchewan Home Renovation Tax Credit

The Saskatchewan tax credits are more encompassing in nature and basically can be claimed on general home renovations for eligible home improvements and are more inclusive in nature. Generally, eligibility is that you must be a homeowner or live with a family member and it must be your principal residence, not a rental or leased property.

Also, if you are earning any business income by renting part of the property, the tax credit will be only on the portion of the property, which is your principal residence.

The renovation expenses must be completed within the tax year, reflected in your annual tax return, and cannot be carried forward. The most important clause is that “the upgrades must be an enduring and integral part of the home or the surrounding property”.

This home renovation tax credit allows up to 10.5% of a maximum of $20,000 in non-refundable credits.

Although the tax credit in this province is more open and inclusive, one must note that certain costs of labour and professional services, cottage renovations, appliances, and routine maintenance are not considered eligible expenses. Saskatchewan residents must look carefully into the details of the criteria and eligibility of these tax credits to avail of this money-saving principle.

Ontario Home Renovation Tax Credit

Ontario has its Home Safety tax credits for seniors (persons over 65 years) or seniors living with a relative in the principal home.

Eligible expenses to make the home safe and accessible can be covered by this renovation tax credit up to 25% or a maximum of $2,500 on a maximum amount of $10,000. These provincial credits are amongst the largest, most generous, and also refundable.

As with other tax credits, the eligible renovations include installing grab bars or railings, wheelchair ramps, widening doors, installation of stair lifts, automated doors, and switches. Persons interested in this tax credit are encouraged to research and confirm with the provincial authorities before commencing the necessary home improvements.

New Brunswick Home Renovation Tax Credit

New Brunswick’s home renovations tax credit for seniors offers its unique credit.

This credit is lower than the ones of Ontario and British Columbia and offers up to $1,000 or 10.5 percent of a maximum expenditure of $10,000. 

However, the credit is refundable and will be reimbursed as a refund on your tax return.

As in line with the other provinces, the eligible expenses enhance safety and accessibility for seniors in and around the home.

Residents of the province older than 65 or those living with a senior relative can qualify for the credits.

Quebec Home Renovation Tax Credit

The government of Quebec has a unique credit for installing a residential wastewater system like a septic tank applicable to only your primary residential home or cottage. The credit consists of a maximum of 20 percent over an eligible expense of $2,500.

Canada Greener Homes Grant

In addition to the Provincial and Federal home renovation tax credits, the federal government offers a greener homes grant. The government assistance offers $5,000 on retrofits made to improve your principal residence’s energy efficiency or green initiatives. Of course, there are certain limiting conditions to be followed. The grant is ineligible on newer home builds, i.e. less than six months old. The grant is non-refundable and non-taxable. The grant saves money as it is not considered “income” on your calendar year for tax purposes.

Renovations to more energy-efficient heating furnaces, newly installed doors, and windows, and solar panels are all included in this category

How can these credits help?

Although they may not appear to be large amounts, for seniors, any housing rebate or credit is a big help as it reduces the cost of living on a fixed income. 

• The aesthetic changes help seniors or disabled people make their homes safer and more accessible as they age. 
• It avoids unnecessary slips and falls and struggles with moving around the home
• Canadian seniors can continue to enjoy life in their own homes rather than go into common residences. 
• the provincial programs help families to improve accessibility and improve numerous conditions in their living spaces 
• Assist in claiming the eligible expenses on their taxes.
• Multigenerational homes are a good solution for older parents taking in their adult children to live with them in their principal homes due to housing affordability and low supply 

With housing affordability increasingly getting harder, Provincial governments also come out as winners since the multigenerational homes relieve the aggravated conditions of low housing supply and improve the real estate market pressures.

Please visit your Provincial or Federal websites or consult a tax professional to learn more about these eligible renovations.