What Is the Multigenerational Home Renovation Tax Credit?

The Multigenerational Home Renovation Tax Credit (MHRTC) is a federal refundable tax credit in Canada that helps with the cost of renovating a home to create a secondary unit. This allows a senior or an adult with a disability to live with a qualifying relative. The credit applies to eligible expenses for renovations that establish a self-contained dwelling for a family member.

Determining Eligibility for the Credit

To claim the MHRTC, eligibility requirements must be met for the claimant, the future occupant, and the property. The person claiming the credit, known as an eligible person, can be the homeowner, their spouse or common-law partner, or another qualifying relative of the individual for whom the suite is being built.

The “qualifying individual” who will occupy the new secondary unit must be a senior aged 65 or older by the end of the tax year, or an adult aged 18 or older who is eligible for the Disability Tax Credit (DTC). This person must be a relative of the eligible person or their spouse. The definition of a relative includes a:

• Parent or grandparent
• Child or grandchild
• Sibling
• Aunt or uncle
• Niece or nephew

The property, or “eligible dwelling,” must be owned by the eligible person and be their principal residence. The renovation’s purpose must be to create a new, self-contained secondary unit with its own private entrance, kitchen, bathroom, and sleeping area. The renovation must adhere to local building codes and permit requirements.

Qualifying Renovation Expenditures

Qualifying renovation expenditures are reasonable costs for goods and services directly related to establishing the secondary unit. These expenses must be for work performed or goods acquired for a qualifying renovation.

Included costs cover items necessary for the construction of the suite, such as building materials, fixtures, and payments to professionals like electricians, plumbers, and architects. Fees for building permits and the rental of necessary equipment also qualify. If you perform the work yourself, you can only claim the costs of materials, fixtures, equipment rentals, and permits.

Certain expenses are excluded from the MHRTC, including:

• The value of your own labor
• Costs for household appliances or home entertainment devices
• Routine repairs and maintenance not part of the renovation
• Security services
• Work done outside the dwelling, such as landscaping or pools

Calculating and Claiming the Credit

The credit is worth 15% of the lesser of two amounts: the total qualifying expenditures or the maximum limit of $50,000. This means the maximum refundable credit a person can receive is $7,500. For example, if total qualifying expenditures were $30,000, the credit would be $4,500. If expenses exceeded $50,000, the calculation is capped at the $50,000 limit, resulting in the maximum $7,500 credit. Only one qualifying renovation is permitted for a qualifying individual during their lifetime. To support a claim, you must keep detailed records, including agreements, invoices, and receipts, as the Canada Revenue Agency (CRA) may ask to see them.

To claim the credit, you must complete Schedule 12, Multigenerational Home Renovation Tax Credit, for the relevant tax year. This schedule is used to calculate the amount of the credit based on the qualifying expenditures. The final amount is then entered on line 45355 of the T1 Income Tax and Benefit Return. The renovation must be completed within the tax year for which the credit is being claimed.