New! Renovation Tax Credit Starting in 2023

Are you renovating your home to make it possible to keep an eye on a senior or disabled adult? Then you’ll be interested to know more about a new refundable tax credit starting in 2023.

The Multi-generational Home Renovation Tax Credit is the lesser of 15% of eligible costs and $50,000 for a maximum real dollar value of up to $7500. Claim the credit in the taxation year that includes the end of the renovation period. That means some taxpayers will want to look for receipts for expenses that occurred prior to 2023.

The claim is for costs spent to construct a secondary suite in the taxpayer’s home for a senior or disabled adult.  These tenants are known as the “eligible person.” In the case of adults with disabilities, these individuals must be at least 18 years of age and must be eligible for the Disability Tax Credit. 

The eligible person must be a parent, grandparent, child, grandchild, brother, sister, aunt, uncle, niece or nephew of the eligible person and their spouses/common law spouse.  The credit may be split between claimants so long as the total cost of the claim does not exceed $50,000. One qualifying renovation is permitted for of an eligible person over their lifetime.

A “qualifying individual” who can make this claim will ordinarily reside or intend to reside in the dwelling being renovated within 12 months after the end of the reno period, or be the spouse or qualifying relation of the “eligible person”.

By the way, if your tenant pays you rent, there may be no tax consequences.  For example, if mom or dad are giving you a stipend to cover some costs once they move in, the money will not be reported in income and rental expenses will not be claimed, as this is considered to be a “cost-sharing arrangement”.  No rental losses are claimable either. 

Eligible expenses for the purposes of the Multi-generational Home Renovation Tax Credit include:

• the cost of labor and professional services
• building materials and fixtures
• equipment rentals and permits. 

The renovation, alteration or addition to the eligible dwelling must be of an “enduring nature” and integral to the eligible dwelling.  It must, of course, be undertaken to enable an eligible person to reside there with their qualifying relation. 

It is also important to establish a secondary unit within the dwelling which is self-contained.  It must be a private residence with a private entrance, kitchen, bathroom facilities and sleeping area. It can be newly constructed or created from an existing living space. Building permits for establishing a secondary unit must be obtained and renovations must be completed in accordance with the laws of the jurisdiction in which an eligible dwelling is located.

The renovation period is also relevant in making the claim.  This is the period that begins when an application for a building permit for a qualifying renovation is submitted; and ends when the reno passes a final inspection or proof of completion according to the legal requirements in your jurisdiction.

Not eligible are the costs of

• furniture, household appliances, electronic devices
• outdoor maintenance and gardening, housekeeping or security services;
• construction equipment and tools that retain value independent of the reno
• routine repairs or maintenance
• financing of a renovation including mortgage interest costs
• any services provided by those not at arm’s length (your son, sister, uncle, etc.) unless they are registered for GST/HST purposes
• no claim can be made for any expenses without receipts.

The Multi-generational Home Renovation Tax Credit cannot be claimed at all if the same expenses are claimed under the Medical Expense Tax credit and/or the Home Accessibility Tax Credit, which has been doubled in 2022 to $20,000. In addition, the claim must be reduced by any rebates or other assistance received for the reno.

Evelyn Jacks is President of Knowledge Bureau and author of 55 books on personal tax filing, planning and family wealth management.  She will host the Advanced Personal Tax Update virtually on January 18 and in-person at Pearson Convention Centre on February 7 with special guest faculty, Master Instructors Alan Rowell and Dr. Dean Smith.  Sign up here.

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