Multigenerational Home Renovation Credit

The Multigenerational Home Renovation Tax Credit (MGHRTC) is a significant development in Canadian tax policy, designed to support families and caregivers by making it financially easier to accommodate senior family members or those eligible for the disability tax credit within their homes. This initiative underscores the government’s recognition of the importance of family, caregiving, and the need for adaptable living spaces that can support multigenerational living arrangements.

The MGHRTC is a refundable tax credit, which means that it can reduce the amount of tax you owe to zero, and if the credit is more than what you owe, you will receive the difference as a refund. Eligible individuals can claim up to $50,000 in qualifying renovation expenses, which translates into a tax credit of up to $7,500. This credit is claimed on Schedule 12 of your tax return for the tax year in which the renovation period ends.

To understand who can benefit from this credit and what types of renovations qualify, it’s essential to delve into the specific terms defined in section 122.92 of the Income Tax Act. These terms include eligible dwelling, qualifying renovation, secondary unit, eligible individual, qualifying individual, and renovation period taxation year.

• Eligible Dwelling: This refers to a housing unit located in Canada, owned by the qualifying individual, their spouse or common-law partner, or a qualifying relation. This broad definition ensures that various living arrangements can qualify for the credit, as long as the dwelling is in Canada.
• Qualifying Renovation: The renovation must be of an enduring nature and integral to the eligible dwelling. It’s undertaken to enable the qualifying individual and a qualifying relation of that individual to reside together in the dwelling. This includes establishing a secondary unit within the dwelling for occupancy by either party.
• Eligible Individual: This includes individuals who ordinarily reside, or intend to ordinarily reside, in the eligible dwelling within 12 months after the end of the renovation period. Eligible individuals can be the qualifying individual, their cohabiting spouse or common-law partner, or a qualifying relation.
• Qualifying Individual: Defined as an individual who is 65 years of age or older at the end of the renovation period taxation year or an individual who is 18 years of age or older and eligible for the disability tax credit at the end of the renovation period taxation year.
• Qualifying Relation: This includes individuals who have reached 18 years of age before the end of the renovation period taxation year and are related to the qualifying individual or their spouse or common-law partner in specific ways, such as being a parent, grandparent, child, grandchild, brother, sister, aunt, uncle, niece, or nephew.

It’s important to note that the MGHRTC does not require the eligible dwelling to be built prior to or concurrently with the secondary unit. Nor does it require the eligible individual to reside in the dwelling before adding a secondary unit. However, there must be a reasonable expectation that both the qualifying individual and the qualifying relation will ordinarily inhabit the housing unit, including the secondary unit, within 12 months after the end of the renovation period.

Qualifying expenditures for the construction of the secondary unit, such as a garden suite, must be supported by acceptable documentation, including agreements, invoices, and receipts that are clearly specific to the construction of the suite.

In conclusion, the Multigenerational Home Renovation Tax Credit offers a substantial financial incentive for families to create living spaces that support multigenerational living arrangements. By understanding the eligibility criteria and ensuring proper documentation of qualifying expenditures, families can take full advantage of this tax credit to foster closer family ties and provide care for senior family members or those eligible for the disability tax credit within the comfort of their homes.

This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. ©2024 Shajani CPA.

Shajani CPA is a CPA Calgary, Edmonton and Red Deer firm and provides Accountant, Bookkeeping, Tax Advice and Tax Planning service.