CRA’s Multigenerational Home Renovation Tax Credit (MHRTC)
The multigenerational home renovation tax credit is a new refundable tax credit that can be claimed on your 2023 Income Tax and Benefit return. This article will provide you with the necessary information to determine:
- Eligibility Requirements
- Qualifying Expenditures and Their Limit
- Steps for claiming the MHRTC
The MHRTC is claimed in the tax year it is completed.
Eligibility Requirements
To be eligible to claim the MHRTC, you must meet all the following criteria:
- Incurred renovation costs to create a secondary housing unit within the house or on the property.
A secondary housing unit is:
- A self-contained housing unit with a private entrance, kitchen, bathroom, and sleeping area (Adding a basement apartment).
- Is newly constructed or created from an existing living space that did not already meet local requirements to be considered a secondary housing unit.
- Meets applicable local requirements, permits, codes, and by-laws.
- One of the individuals living in the existing residence or the new secondary unit must be a qualifying individual.
- A qualifying individual is someone who is a senior citizen (greater than or equal to 65 years of age), or an adult (between 18 and 64) currently living with a disability and is eligible for the disability tax credit (DTC).
- The renovation must have been completed in the tax year.
- This is the only MHRTC claim for the qualifying individual. Only one renovation can be claimed for a qualifying individual during their lifetime.
- The person claiming the credit must be an eligible individual.
An eligible individual is the owner of the unit being renovated; (Or a beneficiary of the trust that owns the unit); is a resident of Canada during the tax year; and is a qualifying relation of a qualifying individual.
They are making the claim because there is a qualifying individual who lives in, or intends to live in, the eligible housing unit within 12 months of the end of the renovation.
A qualifying renovation is for either:
- A qualifying individual, or,
- The cohabiting spouse or common-law partner of a qualifying individual, or,
- A qualifying relation of a qualifying individual (This means that you must evaluate your relationship with the qualifying individual. Even some who are not listed as a qualifying relation to you may be a qualifying relation of a qualifying individual.)
Qualifying Relation
A person who is 18 years of age or older and is a:
- Parent
- Grandparent
- Child
- Grandchild
- Brother
- Sister
- Aunt
- Uncle
- Niece, or,
- Nephew
of the qualifying individual or their cohabitation partner at any time during the tax year.
Eligible Housing Units
Eligible renovated housing units are located in Canada, and owned by the qualifying individual or their spouse (or a trust that they are a beneficiary of) at any time during the renovation period. The housing unit is ordinarily occupied by both qualifying individuals within 12 months after the end of the renovation period.
Qualifying Renovation
A qualifying renovation is the building of, the renovation of, alteration of, or addition to an eligible housing unit for a qualified individual that:
- Benefits the eligible housing unit, and,
- Enables the qualifying person to reside in the house or residence with a qualifying relative by establishing a secondary residence.
Qualifying Expenditures and Their Limit
Qualifying Expenditure
A qualifying expenditure is a reasonable expense that is directly related to the qualifying renovation of an eligible housing unit and is made or incurred after December 31, 2022, and before the end of the renovation period by an eligible individual (or a trust that the eligible individual is a beneficiary of. If a trust incurred the expense, it must be a qualifying expenditure of the eligible individual and the trust must notify that individual of the amount of the outlay or expense related to the eligible housing unit.)
Examples of qualifying expenses include:
- Goods acquired or services received, including work performed by professionals (electricians, plumbers, carpenters or architects),
- DIY expenses include:
- Building materials, Fixtures, Building Plans
- Outlays or expenses for permits required,
- Rental of equipment used in the course of the qualifying renovation.
Expenses that do not qualify
- Annual, recurring, or routine repair or maintenance,
- Household appliances,
- Electronic home entertainment devices,
- Housekeeping, security monitoring, gardening, outdoor maintenance, or similar services,
- Financing costs for the qualifying renovation,
- Goods or services provided by a person not dealing at arm’s length with the individual unless that person is registered for GST/HST under the Excise Tax Act,
- Expenses that can reasonably be considered to have been reimbursed,
- Expenses not supported by receipts,
- Expenses that have already been claimed under the medical expense tax credit or home accessibility tax credit, or both.
Value of the Claim
The maximum amount an eligible person can claim for the MHRTC is $50,000. If they incurred $100,000 in renovation expenses, they can only claim half of the credit. When the costs are shared amongst multiple eligible individuals, the combined claim cannot equal an amount that is over $50,000. The MHRTC is 15% of $50,000 or less in the case when an eligible person did not incur $50,000 in qualified expenditures. This means the maximum tax credit is $7,500.
Splitting the Credit Between Eligible Individuals
All of the following conditions apply when two or more individuals share costs for the same qualifying renovation:
- Each person claiming the MHRTC is an eligible individual,
- The total amount claimed between all eligible individuals is not more than $50,000,
- The eligible individuals can only claim the qualifying expenditures that they incurred,
- No MHRTC was previously claimed for the qualifying individual.
Important Note:
Eligible individuals are allowed to claim the MHRTC for multiple qualifying renovations that are occupied by separate qualifying individuals.
Steps for Claiming the MHRTC
- Understand when you can claim this credit,
- Determine the total amount of qualified expenditures related to the qualifying renovation using Schedule 12: Multigenerational Home Renovation Tax Credit,
- Input the total amount on line 45355 on your income tax return,
- Have all your documentation ready and available for the CRA.
When to claim the MHRTC?
You must claim the multigenerational home renovation tax credit in the tax year when you complete the renovation. The renovation period starts when you make the first Qualifying Expenditure for the Qualifying Renovation and ends when you finish the qualifying renovation. Any qualifying renovations completed in 2023 can be claimed for the MHRTC.
As an example, Joe Williams decides to extend his basement to construct a secondary unit for his 74-year-old father. The renovation started when he deposited $10,000 with ABC Construction Ltd. on June 1st, 2022. The project is expected to take 3 years to complete. For instance, Joe Williams finishes the qualifying renovation on June 15, 2025. Joe will be able to claim the renovation’s qualifying expenditures in 2025.
Supporting Documentation
With any new tax credit, we expect that CRA will review these claims regularly. Please make sure you have appropriate invoices, receipts, and other documentation proving the expenses you’re claiming.
Cash under-the-table expenses cannot be claimed.