If you live in Canada you might be eligible for the Multigenerational Home Renovation Tax Credit which was introduced in the 2022 budget.
This tax credit is a refundable credit that helps with costs of renovations in dwellings that are deemed eligible in order to create a secondary unit that allows for qualified individuals such as a senior or an adult eligible for the disability credit, to live with a qualified relative. Expenditures that qualify for this credit must be incurred after December 31, 2022.
This tax credit is designed to provide financial assistance to homeowners who are making their homes more accommodating for elderly parents or other family member. It is a great way to offset some of the costs associated with renovating a home, and it can be a real lifesaver for families who are struggling to finance a renovation.
Before you consider applying for the Multigenerational Home Renovation Tax Credit, there are a few things to consider.
1. What is considered a “qualifying individual”?
An individual is considered qualified if they are age of 65 or older before the end of the renovation period taxation year, or are 18 years of age or older before the end of the renovation period taxation year for whom an amount is deductible under the “disability tax credit”.
2. What is considered a “qualified relation”?
A qualified relation is an individual who for a period taxation year is at least the age of 18 by the end of the year, and at any time of the year a child, parent, grandparent, grandchild, brother, sister, aunt, uncle, niece or nephew of the qualifying individual or the qualifying individual’s cohabiting spouse or common-law partner.
3. What amount can be claimed in the Multigenerational Home Renovation Tax Credit?
Qualified individuals can claim all qualifying expenditures that were incurred during the renovation in the tax year as long as the total amount claimed does not exceed $50,000 for the same renovation. It’s important to note that during the lifetime of a qualifying individual, only one qualifying renovation is permitted.
Bonus tip: Use your renovation tax credit to future-proof your in-law suite! We highly recommend getting a basement waterproofing specialist to evaluate your home prior to any renovations. This will help you avoid any water damage in your newly renovated suite.
4. How do you calculate the Multigenerational Home Renovation Tax Credit?
It is calculated by multiplying the lowest personal income tax rate (15%) by the lesser of:
a) $50,000
b) the amount of qualifying expenditures incurred by the eligible individual
c) Zero if the individual is not resident in Canada throughout the taxation year.
For example, if the qualifying expenditures totaled $25,000, it would result in a refundable tax credit of $3,750 ($25,000 x 15%).
5. How do you get reimbursed?
The Multigenerational Home Renovation Tax Credit can be claimed on your T1 income tax and benefit return for the renovation period taxation year.
But wait, don’t start your renovations yet!
First and foremost, it’s important to make sure that your renovation plans are in compliance with local building codes and regulations. You don’t want to run afoul of the law, or end up with a home that’s unsafe, unlivable or doesn’t qualify for the tax credit.
Secondly, it’s important to make sure that you’re doing everything you can to ensure the long-term structural integrity of your home. One of the most common issues that homeowners face when renovating their homes is foundation cracking. This can happen for a number of reasons, including changes in soil moisture, shifts in the ground beneath your home, and normal wear and tear.
If you’re not sure how to identify foundation cracking or how to fix it, it’s a good idea to consult with a foundation repair company, like Wise Cracks who specialized in foundation repair.
