The Multigenerational Home Renovation Tax Credit (MHRTC) is a new refundable tax credit introduced by the Canadian government starting in the 2023 tax year. It is designed to assist homeowners with the costs of renovating their homes to create a secondary dwelling unit for certain qualifying relatives to live with them.
The MHRTC is a refundable credit, meaning that even if the individual does not owe any taxes, they can still receive the full credit amount as a refund from the government. This makes the credit particularly beneficial for lower-income homeowners or those with limited tax liabilities.
Frequently Asked Questions
- What is the Multigenerational Home Renovation Tax Credit?
- How much is the Multigenerational Home Renovation Tax Credit?
- Who is eligible for the Multigenerational Home Renovation Tax Credit?
- How to file for the Multigenerational Home Renovation Tax Credit?
- Why was the Multigenerational Home Renovation Tax Credit introduced?
What is the Multigenerational Home Renovation Tax Credit?
The Multigenerational Home Renovation Tax Credit is designed to support families who wish to make their homes more accommodating for multiple generations living under one roof. This non-refundable tax credit aims to ease the financial burden of renovations that enable senior family members or adults with disabilities to live with their relatives in a secondary dwelling or a suite within the main home.
How much is the Multigenerational Home Renovation Tax Credit?
The Multigenerational Home Renovation Tax Credit in Canada allows eligible individuals to claim 15% of the eligible expenses incurred for qualifying renovations up to a maximum expense limit of $50,000. This means that the maximum tax credit amount you can receive is $7,500 per year.
Who is eligible for the Multigenerational Home Renovation Tax Credit?
The eligibility requirements for the Multigenerational Home Renovation Tax Credit in Canada are structured to support families undertaking significant renovations to either accommodate senior family members or adults with disabilities.
- Qualifying Renovations: The renovations must be substantial and permanent modifications that either create a secondary dwelling for a senior or a person with a disability or improve the accessibility of existing spaces. This can include adding ramps, widening doorways for wheelchair access, installing walk-in tubs, or similar modifications.
- Qualifying Individuals: The tax credit is available to homeowners who are making modifications to their residence to accommodate either: a senior (aged 65 or older by the end of the tax year), or an adult with a disability (as defined under the Canadian tax code)
- Residency Requirements: The person for whom the home is being modified (senior or adult with a disability) must either be living in the home or plan to live in the home within a reasonable period after the renovations are completed.
- Relationship Requirements: The homeowner claiming the tax credit must be related to the individual for whom the renovations are being made. This includes relations such as parents, grandparents, children, grandchildren, siblings, aunts, uncles, nieces, or nephews.
How to file for the Multigenerational Home Renovation Tax Credit?
Once you have confirmed your eligibility, gather all documentation related to the renovation expenses incurred on or after January 1, 2023. This includes receipts, invoices, proof of payments, permits obtained, and any other supporting documents that validate the qualifying expenditures for labor, professional services, building materials, fixtures, equipment rentals, etc.
When filing your personal income tax return for the taxation year in which the qualifying renovation was completed, you will claim the MHRTC on line 45355 of Schedule 12. The credit amount is calculated as 15% of your total qualifying renovation expenditures, up to a maximum of $7,500 (based on $50,000 of eligible expenses).
Provide all required information about the renovation, the secondary dwelling unit created, details about the qualifying relative who will occupy the unit, and the total eligible expenses you are claiming. Be prepared to submit the supporting documentation if requested by the Canada Revenue Agency (CRA) to verify your claim.
It is important to note that only one MHRTC claim can be made during the lifetime of each qualifying relative. So if multiple individuals are involved in creating separate secondary units for the same qualifying relative, they will need to coordinate and agree on how to allocate the maximum $50,000 of eligible expenses between them.
Why was the Multigenerational Home Renovation Tax Credit introduced?
The Multigenerational Home Renovation Tax Credit was introduced by the Canadian government as part of the 2021 Federal Budget and came into effect on January 1, 2022. The motivation behind this initiative stems from a variety of social and economic factors impacting Canadians.
A primary driver for the introduction of this tax credit is Canada’s aging population. The government aims to support seniors in living independently for longer periods while remaining close to family members who can provide care and support. This approach helps reduce the reliance on institutional care facilities, which can be costly and less personal.
Another significant factor is the issue of housing affordability. With rising housing prices, multigenerational living arrangements are increasingly becoming a practical solution for many families. This tax credit assists in making such arrangements financially feasible by subsidizing the costs associated with modifying homes to accommodate multiple generations under one roof.
Additionally, the credit supports families caring for adults with disabilities by promoting home renovations that enhance accessibility. This initiative recognizes the importance of enabling persons with disabilities to live comfortably and safely within a family environment, fostering inclusivity and support within the home.