Home renovations can be an expensive endeavour, but sometimes renovating the home is vital to increasing both comfort and accessibility for members of our family. However, as you figure out which doorways to widen and consider adding a private entrance for your new basement apartment, you should know that there are multiple tax credits you can take advantage of.
Whether you are making another residence for an elderly parent or a family member with a disability, or you’re interested in building a more environmentally friendly home, there are home renovation tax credits you can take advantage of.
When you work with a professional contractor like RS Homes, we take the time to research the tax breaks you may be eligible for so we can help our clients make the most of their renovations. From planning and design to applying for permits and rebates, we take care of everything for you.
In this blog, the RS Homes team has put together all the essential information so you can utilize home renovation tax credits to deduct from your income tax.
What’s a Tax Credit?
When you hear someone refer to a “tax credit”, they’re talking about a financial sum that you can deduct from the amount of taxes that you owe. Each year, federal and provincial governments introduce different types of tax credits that homeowners and businesses can take advantage of, with the amount varying depending on the tax credit in question.
- A tax credit allows an individual to deduct money from their annual tax bill, reducing how much money they have to pay the government
- Tax credits as opposed to tax deductions saves you from sending money to the government, rather than just reducing how much annual income you report
- There are 2 main types of tax credits, and they can be broken down as follows:
- Nonrefundable tax credits lower the amount of taxes that you owe to the government, but it will not result in a tax refund.
- Refundable tax credits come to taxpayers as cheques or direct deposits once they’ve filled out the proper forms and have been approved by the administration
Ontario Home Renovation and Improvements Tax Credits
In Ontario, some homeowners may have access to the Seniors’ Home Safety Tax credit, which is a refundable but temporary income tax credit you can file on your taxes. The goal of this tax credit is to help elderly Ontarians and their families make their home safer and more accessible and to live in. This tax credit can help seniors stay in their homes longer so they don’t have to enter the long-term care system.
If you decide to apply for this credit, it can count towards a home reno that was paid for in the tax years in which the renovation was completed. The Seniors’ Home Safety Tax credit is worth 25% of up to $10,000 in eligible expenses when applied to an Ontario senior’s principal residence. This credit is designated for seniors, and allows them to receive a maximum credit of $2,500 in deductions on their Ontario income taxes.
In order to qualify for this tax credit, you must:
- Be at least 65 years old by the end of the tax year
- Be a homeowner who lives with an elderly relative or is planning to live with a senior relative within 24 months by the end of the tax year for which you applied.
So what qualifies as an eligible renovation to get this tax credit?
- Safety bars or grab bars installed in washrooms around the tub, shower or toilet
- Stairlifts, elevators and wheelchair ramps
- Adding a bedroom/living area on the main floor of the residence for easy access
- Handrail installation in hallways or corridors
- Showers with wheel-in capabilities
- Bathtubs with walk-in capabilities
- Toilets that are built for a more comfortable height for people with mobility issues
- Widening of doorways inside or outside
- Installing cupboards or countertops with adjustable heights
- Door locks that are easy to operate
- Replacing door knobs with levers
- Pull-out shelving units for under-counter spaces
- Anti-slip flooring
- Relocation of water taps for accessibility purposes
- Motion-activated lighting solutions and touchless faucets
- Automatic garage door openers
- And more
As for what’s not eligible for this renovation tax credit, here are a few examples that you should know about when planning your remodelling project:
- Any routine maintenance in the home such as electrical or plumbing repairs/upgrades
- Any kind of aesthetic improvement for landscaping and painting
- Furniture, digital devices (including medical alert bracelets) or appliances
- Anything having to do with home security, in-home care and/or housekeeping
Multigenerational Home Renovation Tax Credit
Canada’s Multigenerational Home Renovation Tax Credit was introduced in this past summer’s budget. It provides a tax credit for eligible homeowners who take on specific types of renovations. In this case, the government is trying to help homeowners who are converting or adding a home addition — known as a secondary dwelling — to accommodate an eligible person such as a person with a disability or senior so they can live more comfortably. For this tax credit, people are eligible to claim up to 15% of up to $50,000 from approved expenditures.
The following individuals qualify to build a secondary dwelling under this tax credit:
- Adults with disabilities and senior citizens
- Seniors are defined as persons over the age of 65 or older, who were that age during the renovation period.
- As for adults with disabilities, they are individuals over the age of 18 by the end of the taxation year in which the renovations were done, and they must also be eligible to receive the Disability Tax Credit in the same period.
The following people are eligible as qualifying relations for this tax credit:
- A person who is 18 years old at the time of renovations
- Qualifying relation is defined as a niece, nephew, aunt, uncle, brother, sister, grandchild, child, grandparent or parent, as well as common-law partners and spouses
Who is eligible to claim this tax credit?
The candidates can be broken down into the following types for the Multigenerational Home Tax Credit:
- A person who resides in the residence regularly within a year after the renovation is completed and that person must be:
- A qualifying relation of the eligible person who owns the eligible dwelling
- A qualifying relation of an eligible person who resides in the home
- And no matter how many eligible claimants live in the home, no household may claim more than $50,000 in renovation expenses. And if multiple people are applying for the grant, it must be decided who receives what portion
What is an eligible dwelling?
The government defines eligible dwellings for this tax credit as:
- A home that is owned by one or more parties is either the eligible person claiming the tax credit or a partner/common-law spouse of the person who owns the eligible dwelling.
- The residence where the eligible person must be regularly residing within 12 months of the completed renovation.
- This will also include land around the property but cannot exceed more than a half hectare of the amount of land that the claimant deems necessary to properly use the residence.
What qualifies as a renovation for the Multigenerational Home Renovation Tax Credit:
- A permanent part of the applicant’s residence has been done to create a more comfortable living situation for the family member who lives with the claimant, including a secondary unit.
- A secondary unit is defined as an addition that is self-contained and has its kitchen, bathroom and private entrance.
- The space must be made from an area that could not have already served as a secondary dwelling – you can’t use the grant towards upgrading an already-existing basement apartment.
- To be eligible for the tax credit, you must show copies of a valid permit for the work that was done to the residence.
- Every claimant is entitled to a tax credit for one renovation for that eligible person throughout their life.
What qualifies as the renovation period for the Multigenerational Home Renovation Tax Credit:
- The renovation period begins from the moment you apply for a building permit to kick off the renovation of your qualifying residence.
- The period ends when the renovation has met all legal requirements and undergone an inspection and subsequent approval by the relevant authorities.
- The year in which the renovation is completed is the same tax year for which you can apply for the credit.
What counts as eligible expenses for the Multigenerational Home Renovation Tax Credit?
- All expenses are defined as those which are picked up during the applicable renovation period
- These renovations must be deemed reasonable and needed for an eligible resident to live in the home, also known as a qualifying relation.
- Eligible expenses include, but are not limited to, building materials, equipment rentals, building permits, fixtures, professional services and the cost of labour.
- Furniture or the cost of construction tools is not eligible for this claim
Here are a few more specific examples of items which would NOT qualify for the Multigenerational Home Tax Credit:
- Annual maintenance and repair for appliances, devices or electronics
- Costs incurred for gardening, security, housekeeping or other outdoor maintenance expenditures.
- Mortgage costs or interests picked up in the financing of the renovation.
- Taxes paid on services, specifically HST.
- Any expenses that may have already been obtained through another tax credit or social assistance program.
The Multigenerational Home Renovation Tax Credit will be available on January 1, 2023. The tax credit may be applied to work or materials acquired on or after that date.
Federal Home Accessibility Tax Credit
As a non-refundable tax credit, the Home Accessibility Tax Credit allows qualifying individuals who are seniors or those with a disability, to apply for a tax break on renovations of 15% to an amount that is currently the lesser of $10,000 spent on remodelling. This is calculated by using the lowest personal income of the household and applying your non-refundable tax credit to that amount.
The Ontario government has proposed to increase the annual expense to $20,000 for the Home Accessibility Tax Credit. This provides much-needed support to persons who need to make significant upgrades to increase accessibility such as a bedroom or bathroom that easily allows first-floor occupancy, wider doorways and so much more.
This non-refundable tax credit may be applied to expenses picked up by the homeowner or eligible applicant for the 2022 tax year and beyond.
Canada Greener Homes Grant
Beginning in January 2023, Ontario homeowners can apply for the Canada Greener Homes Grant which is available to all Ontario homeowners no matter what type of fuel they use to heat their homes.
Through this program, homeowners can receive rebates that stem from the costs of sustainable retrofits to the home such as insulation upgrading, installing better doors and windows, or a more efficient furnace or HVAC system.
As the program starts in the beginning of 2023, people living in Ontario may visit the Government of Ontario website or ask their utility provider for more information. This program was created to reduce Canada’s carbon emissions and give Ontarians more affordable homes to live in. Also, in these trying economic times with soaring inflation, it’s never been more important for families to take advantage of these rebates and savings on home renovations.
The Canada Greener Homes Grant program launches in January 2023. Ontario residents can learn more about the eligibility criteria for this program by visiting the Ontario government website.
- Grants between $125 and $5,000, to help with the cost of home retrofits
- Receive up to $600 back for the total cost of a pre-and post retrofit EnerGuide evaluation
- Interest-free loans worth $5,000 to $40,000 that goes towards the cost of major home retrofits
If you say yes to any of the statements below, then you are not eligible for this program:
- I am a renter
- I rent a property that I manage as a landlord
- I started my home renovations before getting EnerGuide to evaluate my property
- My home was built 6 months ago or less
- I haven’t moved into this home and it’s not my current primary residence
Save Money While Renovating Your Home
Now that you know more about the Multigenerational Home Tax Credit, the Canada Greener Homes Grant and the Ontario Home Renovation and Improvements Tax Credits, it’s time to learn how to unlock these savings before you start planning your home renovations. We’ll go over which renovations are included, how to apply and how to make sure you’re not missing out on additional savings.
FAQs
1. What home improvements are tax deductible in Canada?
There are so many things you can claim in the new Canada Greener Homes Initiative. Check out the chart below for a more detailed look at what’s available to Canadian homeowners:
| Home Renovation Project | Total | Important Notes |
| Space and water heating | Up to $5,000 | If you are claiming a pump installation, it must be completed by a professional with a licence. The pump itself may be on the list of approved products alongside the other ground source heat pumps, heat pump water heaters and ground source heat pumps. You must buy the pump from a distributor located in Canada or at a retailer in Canada. |
| Home insulation | Up to $5,000 | Upgrades of home insulation in basement, crawlspace, attic, flat roof, exterior wall, cathedral ceiling or exposed floor. |
| Air-sealing | Up to $1,000 | Getting a professional to seal gaps and cracks around the exterior of the home to help the residence maintain its occupants’ desired temperature. |
| Windows and doors | Up to $5,000 | Making the investment to replace your ageing sliding glass doors, windows and all other doors with more energy efficient models. |
| Thermostat | Up to $50 | Getting a new, smart thermostat can be beneficial if you pair it with another renovation or retrofit, such as upgrading to a high-efficiency furnace. |
| Renewable energy | Up to $5,000 | Installing solar panels on your home so you can have renewable energy in your home all year long. |
| Resiliency measures | Up to $2,625 | When the homeowner undertakes a procedure to protect their home from environmental damages, in accordance with rising concerns over climate change. This must also be combined with an additional retrofit. |
Also, know that there are other various provincial home renovation tax credits. If you live in British Columbia, Saskatchewan, Manitoba, Ontario, Quebec or New Brunswick, refer to your government website for further details. You may be eligible for other, regional rebates and deductions for home renovations you take on.
2. Is there a home renovation tax credit for 2023?
Beginning in 2023, families can claim up to $7,500 in a refundable credit that will go towards building a secondary suite for adults with disabilities or seniors in your family. That $7,500 is supposed to be a credit worth up to 15% of $50,000.
To qualify:
- The secondary unit you construct must be a self-contained unit with a sleeping area, kitchen, and bathroom along with a private entrance.
- The home that is eligible for the refund must be owned by a family member or qualifying relation, a trust, or the actual senior or adult with a disability.
- The request for the refund may be made by the common-law partner or spouse of the person, a qualifying relation, or by the qualifying individual themselves.
- Only up to $50,000 can be claimed on any one project and a qualifying individual can use the credit in question only once in a lifetime.
- Things like appliances, housekeeping services, as well as ongoing maintenance repair or appliance purchases do not count towards the credit.
- For eligibility, the qualifying person must be living in the home or expecting to reasonably live in the home within 12 months of the renovation’s completion.
3. How to claim a home renovation tax credit?
Using personal income tax software or working with your account or financial advisor, you can claim these home renovation tax credits on your yearly tax return. Working with a professional guarantees that you won’t leave any money on the table and will qualify for every discount possible.
It’s also highly advisable to retain any contracts, receipts, permits or work agreements associated with the renovation project. If the federal government decides to audit your return, you should have all the necessary paperwork available to prove your expenditures efficiently and ensure that you’re following all government-mandated guidelines to receive the desired tax benefit.
Contact Us
RS Homes is the preferred home contracting service in Toronto and the Greater Toronto Area. We offer support for our clients for all things related to your home renovation and remodeling project including real estate acquisitions, land development, permits, demolition and construction.
Our experts can also help make sure that you’re taking advantage of all possible tax credits and tax breaks for your home. We will do the research for you, apply for the permits, and ensure that our team is following the right guidelines. You won’t have to worry about missing a crucial step and missing out on the money that’s coming to you!
Are you ready to start building your dream home and taking advantage of claiming home renovations and home improvements on your taxes? Contact RS Homes today to book your free consultation and get the process started!