With multi-generational homes on the rise, there are overlooked tax credits up for grabs

Multigenerational home renovation tax credit

In their 2022 budget, the federal government proposed a refundable tax credit for renovations on homes that allow seniors or disabled individuals to live with a family member 18 years of age or older.

The value of the credit would be 15% of the lesser of the eligible building expenses and $50,000.

The credit is designed to help with putting in a second living unit into a space. To qualify, you need to meet both of the following criteria:

The renovation must be integral to the home and permanent It must establish a unit that an eligible relation can and will reside in

The space can be a new construction or a renovation of an existing space. In order to be considered a secondary living unit, the space must contain a kitchen, private entrance, sleeping area and bathroom.

Types of expenses that you might want to claim are:

• Permits
• Building materials
• Fixtures
• Building plans
• Equipment rentals

If you do the work yourself, the labour will not be eligible for the tax credit. If you have a family member or friend perform the work, you can claim their work as an expense only if they have a GST/HST number. Professional work done by people like electricians, plumbers, architects and carpenters is generally eligible for the claim.

Of course, it’s important to keep all paperwork for tax time. This includes invoices, receipts and contracts associated with the renovation.

If you claim an expense under the Multigenerational Home Renovation Tax Credit, you can’t claim it under the Medical Expense Tax Credit and/or the Home Accessibility Tax Credit.

This credit will not come into effect until Jan. 1, 2023 and will not be retroactive, but the government still offers a tax credit to help make multigenerational homes safe.

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Home accessibility tax credit

This credit is available to you if someone you live with claims the Disability Tax Credit or is over the age of 65 at the end of a tax year.

To be eligible, the renovation has to be a permanent change to your residence and meet one of the following criteria:

Reduce possible harm to the qualified individual when residing in or entering the home Allow the qualified individual to live effectively or gain access to the home

The Home Accessibility Tax Credit has the same requirements as the Multigenerational Home Renovation Credit. However, it can be used to simply make a home more accessible — you don’t need to create a secondary living unit.

British Columbia, Ontario and New Brunswick each offer a specific tax credit for seniors to make their homes more accessible.

Most provinces offer a form of provincial tax credit for home renovation as well. The exceptions are New Brunswick, Prince Edward Island, Alberta and the territories.

The benefits of renovating for multigenerational living

Multigenerational living has many great benefits. It allows families to connect, to learn about one another’s lives, to share in responsibilities and benefit from cross-generational knowledge.

For seniors, it’s a great way to stay actively engaged and is more affordable than retirement communities or care facilities.

Adding a secondary unit to your home can be time consuming and imposing, but the long-term benefits are plentiful. You’re not only creating a space that a loved one can use as their own residence, but you’re also creating a space that can increase the value of your home.

While you have a family member living with you, they are able to have a space they can call their own. Not only do they have privacy, but it also gives them a chance to separate from the rest of the family, giving both them and you a break.

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Support your family, support your financial future

When your family member is no longer using the living space, you can optimize it in a variety of ways. If you believe that you’re going to have a need for it in the near future, you can offer it up as a short-term rental. This will provide you with some additional income while the space is unused.

If you don’t think you’ll require the space any time soon, you can rent out the secondary space for a longer time period. Having a long-term tenant in your home is an additional responsibility, but it can also generate regular, steady income for you and your family.

When it's time to sell your property, having a secondary living unit will add value to property. When marketing your home, emphasizing the rental-income possibilities of the secondary unit will be attractive, especially for families looking for creative ways to pay their mortgages.

If you have a multigenerational home, consider taking advantage of the available tax credits to increase the functionality and value of your property.