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New for the 2023 tax year, you might be able to claim the Multigenerational Home Renovation Tax Credit for renos to your home. Here’s what you can claim.
Thinking about asking a senior-age parent to move in with you? If this involves renovating your home to create a secondary unit for them, you may qualify for a new federal tax credit: the Multigenerational Home Renovation Tax Credit (MHRTC).
Multigenerational households—those composed of three or more generations under one roof—are Canada’s fastest-growing type of household. From 2001 to 2021, they increased by 50%, according to numbers from the 2021 census. Factors contributing to this remarkable spike include bloated housing costs, a tight real estate market, rising interest rates and an aging population. For Canadians with aging parents or other relatives who require care, establishing a multigenerational home can make a lot of sense, practically and financially. However, there are substantial costs associated with creating a secondary unit, and that’s where the new Multigenerational Home Renovation Tax Credit (MHRTC) comes in.
The MHRTC is a new refundable tax credit, introduced in the 2022 budget, that’s designed to assist with the cost of renovating a home to create a secondary unit for a qualifying relative. The credit took effect on Jan. 1, 2023.
With this credit, you can claim 15% of the value of your renovations costing up to $50,000. In other words, if you spend $50,000 or more, the most you can claim is $7,500 ($50,000 x 15% = $7,500). If you spend less, the credit is 15% of your qualifying expenditures.
The MHRTC is available for a very specific purpose. To be eligible, you must be renovating your home in order to create a secondary unit for a “qualifying relative”:
A secondary unit must be self-contained and have its own entrance, kitchen, bathroom and sleeping area. Note that there is only one such renovation per family member allowed, meaning that if you claim the MHRTC to build a unit for your parent, for example, your sibling cannot also build a unit for your parent and claim the credit.
The costs of most renovation goods and services are allowed. These might include permits, building materials, tradespeople and equipment rentals. Note that things like household appliances, outdoor maintenance and security monitoring are not eligible. Also, if you do the work yourself, you cannot claim the value of your labour or your tools.
Make sure you keep all documentation of your expenditures, such as invoices and receipts, and that they include itemized lists of purchases; descriptions of work performed; vendors’ names, business addresses and GST/HST numbers; and the dates of purchase and delivery.
The MHRTC must be claimed in the same tax year that the renovations are completed, meaning that if you begin your renovations in 2023 and complete them in 2024, you’ll apply for the tax credit in the 2024 tax year.
When you complete your tax return, you can claim the MHRTC on line 45355 of your T1 general tax form. The Canada Revenue Agency (CRA) has more info about how to claim the MHRTC.
Not sure if you qualify? The first step: read the rules on the Government of Canada website. The CRA is also responding to eligibility concerns raised since the MHRTC was announced in 2022.
For example, in response to an inquiry about whether the secondary unit must be built after the primary unit, the CRA indicated that the tax credit applies no matter the order in which the units are built. In answer to another inquiry, the CRA clarified that there is no requirement for the qualifying family member to be living with the credit applicant prior to the renovation.
Every family’s situation is unique. If you’re unsure about whether your renovation project is eligible, you can contact the CRA about the Multigenerational Home Renovation Tax Credit or consult your accountant.
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