The Multigenerational Home Renovation Tax Credit (MHRTC) is a new government support in 2023, which allows Canadians to create a safe and nurturing space for their family members aged 65 and above, or with a disability. Let’s break down the ins and outs of this credit, to help better understand how it can benefit you and your family.

Planning to buy or sell in the near future? Download our e-books right here.

Unpacking the Multigenerational Home Renovation Tax Credit

Earlier this year the Multigenerational Home Renovation Tax Credit came into play, aiming to provide a helping hand to homeowners who wish to transform their abode into a more accessible haven for their loved ones. This credit is meant to help ease the financial strain of home renovations to allow for our elders and those with unique needs to have their own private spaces when they may not be able to do so without help.

The key feature of this credit is support for renovations that establish a secondary unit within (or as an addition to) your home, allowing them to maintain their independence while staying close to the heart of family life.

The Multigenerational Home Renovation Tax Credit’s Worth and Qualifications

Now, let’s talk numbers. The Multigenerational Home Renovation Tax Credit offers a credit worth 15% of qualifying expenses up to $50,000. So, if you spend $50,000 (or more) on the renovation, your credit is worth $7,500. But even more importantly is who qualifies as a relative. The inclusivity of this credit is better than expected, reaching beyond parents and grandparents—to siblings, children, aunts, uncles, nieces, and nephews—of the homeowner, their spouse, or common law partner.

A qualifying renovation focuses on creating an enduring and self-contained space, as an alteration or addition to your home. The basic requirement is a private unit within your home complete with a separate entrance, kitchen, bathroom, and sleeping area.

Almost all renovation materials and services qualify for the credit, along with the cost of permits and rental equipment used in the renovation. However, there are some items that do not qualify: the cost of annual, recurring, or routine repair or maintenance, household appliances, home entertainment devices, security monitoring, gardening, outdoor maintenance, and financing costs (such as interest on a line of credit). In addition, if you’re doing the work yourself, your labour and tools do not qualify.

You also cannot claim the credit in conjunction with other tax credits. For example, if your renovation requires the installation of a wheelchair ramp which qualifies for the Medical Expense Tax Credit (METC) or the Home Accessibility Tax Credit (HATC) and you claim one or both of them, you cannot claim the MHRTC.

When it comes to claiming expenses, it’s important to note that only completed renovations are eligible for credit. Here we must emphasize the significance of proper documentation, by retaining all invoices, receipts, contracts, and agreements. This paperwork is required to identify the vendor/contractor and their GST/HST registration, along with the purchase, delivery, service, and installation dates. Only expenses incurred in 2023 and beyond are eligible.

Whether buying or selling, here are a few more articles to help you along the way:

Clarity for Recent Purchases and New Construction

Recently there has been more information provided by the Canada Revenue Agency regarding newly built and homes still under construction, per the Income Tax Act. Notably, the Act does not require that the primary home be fully built prior to construction of the secondary unit in order for expenses to qualify for the MHRTC. In addition, it does not require the taxpayer to live in the home prior to the addition of the secondary unit.

So, what exactly does that mean? Well, if you have a brand-new home built along with a secondary unit, construction on both can occur at the same time and the expenses for the secondary unit will qualify. It also means that if you buy a new home and add a second unit you do not have to reside there before beginning construction, all expenses will be covered from the moment you take possession of the property.

The only stipulation is that there must be a “reasonable expectation” that both the taxpayer and their relative will “ordinarily inhabit” both the main home and secondary unit within one year of the renovations completion date.

Compassion and Practicality

The Multigenerational Home Renovation Tax Credit isn’t just about tax benefits; it’s about fostering connection while encouraging independence for seniors and those with disabilities. For full details about the MHRTC visit canada.ca.

As your trusted local Real Estate Professionals, we at the Lisa Hartsink Team are here to help you utilize it to create a nurturing space for your loved ones. Please don’t hesitate to reach out for personalized guidance or referrals to trusted trades people at 905-873-9944 or info@lisahartsink.com. Together, we can make your home a sanctuary of support and compassion!