*This post was created in collaboration with Alpine Credits
Are you looking to renovate your home to accommodate additional family members, including those who are older or physically-impaired? If so, you may qualify for a tax credit to help you cover the construction costs.
Many Canadian households include several generations of families, such as grandparents, parents, and children living together in the same home. For many of these families, living under the same roof makes it easier to care for elderly family members, especially those who may have medical or mobility issues.
Making changes to an existing home to provide more living space for an additional family member can cost thousands of dollars, which may be more than a family can afford. To help these families make the necessary changes to their homes to accommodate multiple generations living under the same roof, the federal government recently introduced the Multigenerational Home Renovation Tax Credit (MHRTC).
With the new tax credit, multigenerational households can get a tax break on renovation and construction costs to ease their financial burden. Let’s take a closer look at this tax credit to see how it can help you, and if you qualify.
Key Points
- The MHRTC allows you to claim a 15% tax credit up to $50,000 in renovation costs to building a secondary suite in your home, which can put up to $7,500 back in your pocket.
- To qualify for this tax credit, you must have a qualifying relation to the person you’re making changes to your home for, and the renovations must also meet specific eligibility criteria.
- There are also other ways to access the money to pay for renovations, including home equity loans and HELOCs.
What Is The Multigenerational Home Renovation Tax Credit (MHRTC)?
Under its Budget 2022, the federal government introduced the Multigenerational Home Renovation Tax Credit, which would provide as much as $7,500 to support the construction of a secondary suite for seniors or adults with disabilities.
How Much Can I Claim Under The Multigenerational Home Renovation Tax Credit?
The Multigenerational Home Renovation Tax Credit allows families to claim a 15% tax credit up to $50,000 in qualifying renovation or construction costs associated with building a secondary suite. This would result in a credit of as much as $7,500 ($50,000 x 15%).
Purpose Of The Multigenerational Home Renovation Tax Credit
The purpose of the MHRTC is to help families pay for renovating their homes to create secondary units for eligible family members.
Accommodating additional family members from different generations can be challenging, depending on the amount of space in a home. In many cases, renovating a house or adding to it can provide the extra space needed to comfortably house additional family members. Living together also helps to consolidate housing costs to accommodate more than one family, especially given the soaring costs of home prices these days.
The MHRTC can provide the added financial assistance many households may need to cover these construction costs.
Eligibility Requirements For the Multigenerational Home Renovation Tax Credit
In order to qualify for this tax credit, specific requirements must be met.
Qualifying Individual Requirements
The family member you’re renovating your home to accommodate must be considered a “qualifying individual”, which requires that they meet one of the following criteria:
- Be at least 65 years old before the end of the renovation period taxation year; or
- Be at least 18 years old and classified as disabled before the end of the renovation period taxation year
Qualifying Relation Requirements
You must have an eligible relationship with the person you’re renovating your home for, which requires that you meet the following criteria:
- Be at least 18 years old by the end of the year; and
- Have a qualifying familial relationship with the qualifying individual at any time in the year
- Own the home being renovated or a long-term tenant with the right to update the property
Qualifying Dwelling Requirements
The home you’re renovating must also meet qualification requirements, including the following:
- Be located in Canada
- Be the primary residence of the multigenerational family
- The renovated unit must be occupied within 12 months after the renovation period
Qualifying Renovation Requirements
The modifications made to a home must meet certain criteria to be eligible for the MHRTC:
- Be long-lasting
- Create a secondary suite to allow the qualifying individual to live in the home
What Expenses Are Eligible?
You can claim any expenses that are directly associated with the renovation. For instance, eligible expenses may include any of the following:
- Permits
- Building materials
- Equipment rentals
- Contractors
- Architects
- Tradespeople (ie. plumbers, electricians, carpenters, etc)
- Accessibility features (ie. ramps, handrails, walk-in bathtubs, etc)
What If I Complete The Renovations Myself?
As mentioned, one of the eligible expenses under the MHRTC are contractors and other professionals needed to orchestrate the renovations. But if you perform the work on your own, your labour and any tools that you already own and use are not eligible for the tax credit. However, all other requirements, such as building materials and permits, still qualify.
What Expenses Don’t Qualify For The MHRTC?
Not all expenditures are eligible for the MHRTC, including the following:
- Cost of maintenance or repairs
- Appliances
- Electronics
- Housekeeping
- Security monitoring
- Landscaping
- Cosmetic updates
- Financing costs for the qualifying renovation (ie. interest and fees on loans)
- Expenses that have already been claimed under other tax credit programs
How Do I Claim The MHRTC?
You need to claim the MHRTC in the same tax year that the renovations are completed. So, if construction begins in 2024, but is completed in 2025, you would apply for the MHRTC in the 2025 taxation year. The tax credit can be claimed on your T1 income tax and benefit return.
Other Ways To Help Finance Your Multigenerational Home Renovations
If you need extra cash or can’t qualify for the Multigenerational tax credit, you can still fund your renovations in other ways. Particularly, you can use the equity in your home to finance your costs.
If you have equity in your home, you can tap into it and get a home equity loan or line of credit.
You can generally borrow up to 65% to 80% of your home equity. Accessing your home equity through these financing options typically means lower interest rates and larger loan amounts compared to other loan types.
Where Can You Get A HELOC Or Line Of Credit?
Many banks and financial institutions offer loans backed by your home equity. However, qualifying can be difficult if your credit score, income, or debt levels don’t meet their standards. But that doesn’t mean you can’t get a home equity loan or HELOC due to bad credit or low income.
With alternative lenders like Alpine Credits, approval is based on the equity in your home and not your credit score, income, or age.
Final Thoughts
If you have a senior or a family member with a disability living at home with you, you may need to make some changes to your existing home to accommodate them. To help financially compensate for this cost, you may qualify for the Multigenerational Home Renovation Tax Credit, which can provide you with a few extra thousand dollars to cover the cost of renovating your home.
