Home renovations are big in Canada right now, as many homeowners are opting to make changes and/or additions to their current residences rather than try to find a new home in the current real estate market. And, while the cost of renovating one’s home is usually considered a personal expense, which doesn’t qualify for any tax credit or deduction, starting this year there is an exception to that rule.
For 2016 and subsequent taxation years, a non-refundable tax credit can be claimed for home renovation work that's completed to make it easier and/or safer for a senior or disabled individual to live in their home.
In most cases, such renovations are done to enable these individuals to continue to live in their existing homes, but claims for the new credit – the Home Accessibility Tax Credit, or HATC – are not limited to those individuals. Eligible family members (generally, a spouse, common-law partner or supporting relatives) of a senior or disabled person can similarly claim the HATC for qualifying renovations made.
In practical terms, those rules mean that any person who can claim the federal disability tax credit, or is over the age of 65, and makes eligible renovations to his or her home can claim the credit. In addition, if this person moves in with a family member because they can no longer live on their own, eligible renovations made by the family member to their own home will similarly qualify for the credit.
The HATC can be claimed, at a rate of 15%, on up to $10,000 in qualifying renovations carried out in a year. Consequently, a taxpayer who spends the maximum amount on qualifying renovations in a year will have his or her tax bill for that year reduced by $1,500.
A number of other provisions governing the HATC program are particularly generous in nature. Where financial assistance, by way of grants, forgiveable loans, or other tax credits, is available from the federal or provincial governments, the HATC rules provide that such assistance, of any kind, does not reduce the amount which can be claimed for purposes of the HATC.
In addition, if a homeowner receives a rebate or incentive from the vendor providing goods or services in connection with the home renovation, eligible expenses for purposes of the HATC are not reduced by the amount of such incentive or rebate.
Finally, the HATC is a rare exception to the rule that an expense can only be claimed once, as is almost always the case with our tax law. That is to say, if an expense qualifies for both the HATC and the medical expense tax credit, it can be claimed for both, in the same year.
There are, of course, rules setting out the kinds of expenses that will be eligible for the HATC. Generally, in order to qualify, home renovation expenses must be of a nature that increases a qualifying individual’s access, mobility or functioning within the home, or increases that individual’s safety within that home. As well, any changes made must be of a permanent nature, in the sense that they become a permanent part of the home.
Consequently, the purchase of a portable shower seat would not qualify for the credit, but the installation of a permanent shower seat, which is affixed to the wall or floor of a tub or shower, would qualify. On a larger scale, the cost of renovations done to add a ground floor bedroom for a senior who can no longer climb stairs (or do so safely) should also qualify for the HATC.
While the Canada Revenue Agency (CRA) website does not provide much detail on the specific types of expenses that will qualify for the HATC, it does list examples of ineligible expenses. Some of these are as follows:
- amounts paid to acquire a property that can be used independently of the qualifying renovation;
- the cost of annual, recurring, or routine repair or maintenance;
- household appliances;
- electronic home-entertainment devices;
- the cost of housekeeping, security monitoring, gardening, outdoor maintenance, or similar services;
- financing costs for the qualifying renovation; and
- renovations made primarily for the purpose of increasing or maintaining the value of the dwelling.
The HATC rules also address the question of who can carry out qualifying renovations. Such renovations performed by qualified tradespeople — electricians, plumbers, carpenters etc. — will qualify for the credit. Where an individual claiming the credit does the work himself or herself, a credit will be available for the cost of building materials, fixtures, equipment rentals etc., but no credit is claimable for the cost of labour. Finally, neither labour nor material expenses are eligible for the HATC where otherwise eligible renovations are done by a family member.
In all cases, any expenses claimed must be supported by agreements or contracts, invoices and receipts, and such documents must include the following information:
- information that clearly identifies the vendor/contractor, their business address, and, if applicable, the 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, including receipts or invoices that show that they are paid in full or are accompanied by other proof of payment, such as a credit card slip or cancelled cheque.
In order to be eligible for a claim for the HATC on the 2016 tax return, qualifying renovations must be contracted for, carried out, and paid for before the end of this calendar year.
Since 2016 is the first year for which the HATC can be claimed, the forms used to make that claim are not yet available, but more information on the credit itself can be found on the CRA website.
