What Is the Multigenerational Home Renovation Tax Credit?

Introduced in the 2022 federal budget and effective from January 1, 2023, the Multigenerational Home Renovation Tax Credit (MHRTC) allows qualified residents to claim 15% of their renovation costs of converting their home into a multigenerational space. That could mean a refund of up to $7,500. While the ultimate goal is to create self-contained living units for seniors and adults with disabilities, how exactly do you qualify, and what expenses can you deduct?

5 Things to Know About MHRTC

• The MHRTC offers a 15% tax credit on eligible renovation costs for creating self-contained units for seniors (65+) or adults (18+) who qualify for the disability tax credit.
• The tax credit covers renovations up to $50,000, providing a maximum refund of $7,500.
• Eligible expenses include professional labour, building supplies, and equipment rentals.
• Non-eligible costs include new appliances, personal labour, and outdoor improvements.
• Claims must be submitted on the T1 general tax form with detailed documentation of expenses.

What Is the Multigeneration Home Renovation Tax Credit?

The Multigenerational Home Renovation Tax Credit (MHRTC) is a new initiative introduced in the 2022 federal budget to help households create living spaces for seniors and adults with disabilities.

Effective from January 1, 2023, this tax credit allows qualified residents to claim 15% of eligible renovation costs, up to a maximum of $50,000. This translates to a potential tax refund of up to $7,500, making it easier for individuals to afford necessary home modifications. Essential features like a private entrance, kitchen, and bathroom must be included in the renovation.

It's important to keep thorough documentation, such as receipts and invoices, for all qualifying expenses. These documents will be necessary when you file your claim on the T1 general tax form during the tax year the renovations are completed.

Before planning too far ahead, it's important to note that only one claim is permitted per qualifying family member's lifetime, so you'll want to make the renovation count.

How to Qualify For the Multigenerational Home Renovation Tax Credit

• You must be renovating your home to create a secondary unit for a qualifying relative.
• The qualifying relative must be either:
  • A senior family member aged 65 or older by the end of the renovation period taxation year.
  • An adult family member (at least 18 years old) who qualifies for the disability tax credit.
• The secondary unit must be self-contained, with its own:
  • Entrance
  • Kitchen
  • Bathroom
  • Sleeping area

What Expenses Am I Allowed to Deduct?

When claiming the Multigenerational Home Renovation Tax Credit, you can deduct costs associated with labour, building supplies, equipment rentals, and permit applications, but there are some nuances to keep in mind.

Labour Costs

You can claim labour costs directly related to constructing a qualifying secondary unit, including professional fees for services from registered electricians, plumbers, carpenters, and architects. That said, if a family member is the one who's providing labour, their costs are only deductible if they're registered for GST/HST. This caveat ensures that the services are legitimate and properly documented.

Keep in mind that claims for these labour costs must be supported by detailed invoices. These invoices should identify the services provided and the corresponding payments made, so you need to maintain accurate records throughout the renovation process.

Building Supplies & Equipment Rentals

When it comes to building supplies, you can deduct certain costs for materials directly related to the renovation of a secondary unit. This could include lumber, drywall, insulation, and other necessary building materials, even if you're the one performing the labour.

Equipment rentals are another eligible expense under the Multigenerational Home Renovation Tax Credit. So, if scaffolding, specialized tools, or other necessary equipment needs to be rented for the renovation, these costs can be included in your claim.

Throughout the renovation, verify that all expenses are supported by receipts and invoices. If you receive any rebates or reimbursements, you'll need to deduct these from your total claimable amount. Proper documentation will verify you maximize your tax refund under the MHRTC.

Permit Application Costs

Understanding which expenses qualify under the Multigenerational Home Renovation Tax Credit can greatly impact your renovation budget. Permit application costs are one of the eligible expenses you can deduct when renovating to create a secondary unit for qualifying relatives.

These permit fees must be directly related to the multi-generational home addition. In other words, any permits you need to legally proceed with the construction of a self-contained secondary unit are eligible.

What Expenses Am I Not Allowed to Deduct?

When considering the Multigenerational Home Renovation Tax Credit, it's important to know which expenses you can't deduct. For instance, you aren't allowed to claim costs for buying new home appliances or for general maintenance tasks, and there are caveats for labour.

Buying New Home Appliances

When buying new home appliances or home entertainment devices, keep in mind that the MHRTC doesn't cover these costs. For example, if you're purchasing a new refrigerator, oven, or washing machine, these items are not eligible for deduction under the Multigenerational Home Renovation Tax Credit. This tax credit focuses on expenses directly related to your multi-generational house plans, so general household appliances—even if they're necessary for daily living—don't qualify.

Maintenance Expenses

It's also important to know that general repairs and upkeep of your home won't qualify for deductions under the Multigenerational Home Renovation Tax Credit. This includes routine fixes like patching up walls, repairing leaky faucets, maintaining the HVAC, or any other regular tasks.

Additionally, outdoor improvements such as landscaping, gardening, cleaning the gutters, or lawn care can't be claimed. While these activities may be essential for a home's appeal, they aren't considered necessary for creating a secondary unit for seniors or adults with disabilities.

Expenses related to tools or equipment purchases that aren't directly tied to the renovation work are similarly excluded. This means if you buy a new drill or a set of wrenches for general use, you can't deduct those costs under the MHRTC.

Non-Professional Labour (Including Yourself)

You should also know that non-professional labour—including work done by yourself or family members—won't qualify for the Multigenerational Home Renovation Tax Credit.

Any do-it-yourself efforts you undertake, or assistance from relatives, are explicitly excluded from eligible expenses. This means that even if you or your loved ones do an excellent job, the costs associated with such non-professional labour can't be claimed under the MHRTC.

Save on Taxes With a Qualifying Home Renovation

The Multigenerational Home Renovation Tax Credit is a great way to start enjoying the benefits of multi-generational living. By understanding the eligibility criteria and allowable expenses, you'll be in a better position to maximize your tax benefit while creating a more accessible—and comfortable—home.