The CRA has clarified the rules for its new home renovation tax credit: What you need to know
Among the 2023 tax changes that took effect for this year is the brand new Multigenerational Home Renovation Tax Credit (MHRTC). This refundable credit was introduced to assist Canadians with the cost of renovating a home to create a secondary unit so that a family member who is over 65 years of age (or 18 if they qualify for the disability tax credit) can live with you. The credit is available for renovation expenses incurred in 2023 and beyond.
Let’s review the basic rules surrounding this new credit, and then highlight a helpful Canada Revenue Agency technical interpretation released last month that could be of benefit to taxpayers who may be constructing, rather than renovating, a new home.
A qualifying renovation is one that creates a secondary unit in your home that will be occupied by your relative. The refundable credit is worth 15 per cent of the value of your qualifying expenditures, up to a maximum spend of $50,000. So, if you spend $50,000 (or more) on the renovation, your credit is worth $7,500.
The relative can be a parent, grandparent, child or grandchild, brother, sister, aunt, uncle, niece or nephew of the homeowner or their spouse or common-law partner.
A “qualifying renovation” is a renovation, alteration or addition made to your home that’s of an enduring nature and integral to the home. The renovation must be undertaken to establish a secondary unit within your home in which your relative may live. A secondary unit is a self-contained housing unit with a private entrance, kitchen, bathroom facilities and sleeping area. It can either be newly constructed (more about that below) or created from an existing living space that didn’t already meet the local requirements to be considered a secondary
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