Multigenerational Home Renovation Tax Credit (MHRTC)

The Multigenerational Home Renovation Tax Credit (MHRTC) is a new refundable credit introduced in the 2022 budget by the Canadian government to assist with the cost of renovating an eligible dwelling to establish a “Secondary Unit” that enables a qualifying individual (a senior or an adult who is eligible for the disability tax credit) to live with a qualifying relation. The credit is available for qualifying expenditures made or incurred after December 31, 2022, for services performed or goods acquired after that date. The maximum amount of the refundable credit is $7,500 which is calculated at 15% of maximum renovation expenses of $50,000.

The MHRTC is intended to address the growing need for affordable housing options for seniors and individuals with disabilities. It aims to provide financial assistance to families who wish to create a self-contained secondary unit within their home to accommodate their loved ones. This credit will help families offset the costs of renovations and construction, making it easier for them to create a comfortable and safe living space for their relatives.

Let’s look at an example:

Jack plans to build a secondary unit for his 66-year-old mother, Margaret. Assuming Jack spends $45,000 in qualifying expenditures in March 2023, calculate the MHRTC he can claim in his 2023 Income Tax and Benefit Return. Since Jack spent $45,000 in qualifying expenditures, the maximum tax credit he could receive would be $6,750 (15% of $45,000).

The “Qualifying Individual” is defined as the individual who will claim the credit on their annual T1 income tax and benefit return. The qualifying individual must have a “qualifying relation” to the individual(s) occupying the renovated space who are either a parent, grandparent, child, grandchild, brother, sister, aunt, uncle, niece or nephew of the qualifying individual or the qualifying individual's cohabiting spouse or common-law partner. In addition to the qualifying relation condition, they are required to be one of the following individuals:

65 years of age or older before the end of the renovation period taxation year; or

18 years of age or older before the end of the renovation period taxation year for whom an amount is deductible under the Disability Tax Credit (DTC) in computing tax payable for a renovation period taxation year, or would be so entitled if the restriction for attendant care were disregarded. (source: Canada.ca)

A “Qualifying Renovation” under the multigenerational home renovation tax credit (MHRTC) is a renovation that creates a self-contained secondary unit within an eligible dwelling. The secondary unit must have a separate entrance, kitchen, bathroom and sleeping area. The renovation must also meet the local requirements for secondary dwelling units and any other conditions set by the MHRTC program. The qualifying renovation must be permanent in nature and completed between December 31, 2023 and the end of the renovation period. Only one qualifying renovation is allowed during the lifetime of a qualifying individual.

The “Qualifying Expenditures” under the MHRTC are the expenses that are directly related to the renovation of an eligible dwelling to create a self-contained secondary unit for a senior or a person with a disability. Some examples of qualifying expenditures are goods acquired or services received, such as building materials, fixtures, equipment rentals, building plans, permits, and work performed by professionals (such as electricians, plumbers, carpenters, or architects. If you do the renovation work yourself, only the expenses for building materials, fixtures, equipment rentals, building plans and permits will be considered a qualifying expenditure.

However, some expenses may not qualify such as:

Annual, recurring or routine repair or maintenance

Household appliances or electronic home-entertainment devices

Housekeeping, security monitoring, gardening, outdoor maintenance or similar services

Financing costs for the renovation

Goods or services provided by a person related to you, unless they are registered for GST/HST

Expenses that are reimbursed or claimed under another tax credit such as Medical Expenses Tax Credit (METC) or Home Accessibility Tax Credit (HATC)

Expenditures that are not supported by official receipts

Eligible expenses must be supported by acceptable documentation, such as agreements, invoices, and receipts. They must clearly identify the type and quantity of goods purchased or services provided, including, but not limited to, the following information, as applicable (source: Canada.ca):

information that clearly identifies the vendor/contractor, their business address, and, if applicable, GST/HST registration number

a description of the goods and the date when the goods were purchased

the date when the goods were delivered (keep your delivery slip as proof) and/or when the work or services were performed

a description of the work performed, including the address where the work was performed

the amount of the invoice and

proof of payment. Receipts or invoices must indicate that they are paid in full or be accompanied by other proof of payment, such as a credit card slip or cancelled cheque

For further information please contact Taxtron Support at 416-491-0333 or visit www.taxtron.ca