A substantial renovation can lead to a significant tax rebate.nicolamargaret/iStockPhoto / Getty Images
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If your client is purchasing a new home or embarking on a renovation, there’s an opportunity to advise them on the tax credits and rebates they can claim.
“Clients might not be aware of all the tax credits available to their specific situation,” says Julia Chung, president and certified financial planner at Spring Planning Inc. in Vancouver. “Many times, clients will also not tell you about some of their plans because they didn’t even realize it would be relevant to their tax situation.”
That lack of client communication, or proactivity from their advisor, could translate into leaving money on the table. Below are four tax credits or rebates to help homeowners keep more money in their pockets.
1. The home accessibility tax credit
With the home accessibility tax credit, seniors can claim up to $20,000 toward qualifying accessibility expenses and receive a 15-per-cent tax credit to a maximum of $3,000.
Kevin Burkett, tax partner at Burkett & Co. Chartered Professional Accountants in Victoria, says one popular reno as clients age is replacing a deep-soaker bathtub with one that’s easier to enter and exit.
But there’s a catch to qualify for this tax credit – the taxpayer must have been 65 or older at the end of 2023 or eligible for the disability tax credit (DTC).
“Let’s say you’re 64 and you’re about to do that tub replacement … maybe wait 24 months and then you’ll get the credit,” Mr. Burkett advises.
While more seniors prefer to age in place, not all are perfectly content with their living arrangements, according to Statistics Canada (StatsCan). More than half are dissatisfied with the accessibility of their accommodation and may renovate to improve the situation.
2. The multigenerational home renovation tax credit
Due to housing shortages and affordability issues, multigenerational living arrangements have become the fastest-growing housing segment, increasing by 50 per cent since 2001 to more than 442,000 households, according to StatsCan.
The multigenerational home renovation tax credit was introduced last year to make cohabited living spaces better for all generations, Ms. Chung says. To qualify, one member of the household (the “qualifying individual”) must be either more than 65 years old at the end of the renovation period or more than 18 years old and eligible for the DTC.
A family member who is 18 or older and lives with the qualifying individual can also claim the credit. But family members who reside together but don’t fall into those specific age brackets and qualifications are out of luck, she adds.
A qualifying family member who incurs renovation expenses in 2023 can claim up to $50,000 in qualifying expenses to create a secondary unit – including materials, services provided by contractors and permits, Mr. Burkett says. In return, they get a 15-per-cent tax credit up to a maximum of $7,500.
“If your mom or dad are getting older and you want to renovate your house to make a comfortable living space for them, this credit is intended as a support or incentive,” he says.
As it’s a new tax credit, he says many clients may not know about it, which is why it’s imperative for advisors to ask clients about their life circumstances consistently.
“With this knowledge, clients may rethink the timing and amount they spend on a renovation,” Mr. Burkett says. “For example, a client with a $40,000 budget may expand to $50,000, knowing they will get a $7,500 credit on their tax return.”
3. The home buyers’ amount
New homeowners can claim up to $10,000 on their tax return. “The only real criterion is that you did not live in another home that you or your spouse or common-law partner owned in the year of acquisition, or in any of the four preceding years,” Mr. Burkett says.
One exception is clients who receive the DTC. In that case, they don’t need to be a first-time home buyer to receive this credit.
He advises clients to look into similar provincial credits for home renovations in Ontario, Saskatchewan, British Columbia and New Brunswick.
4. The HST new housing rebate
Homeowners who build or renovate the interior of their homes substantially, by at least 90 per cent, may qualify for the HST new housing rebate. It must be their primary residence and can be any type of dwelling, such as a single-family home or condo.
Homeowners can apply for this tax rebate, which falls under the Excise Tax Act. There’s a two-year limit to apply from substantial completion or move-in date. The rebate may also apply to new residential housing, such as laneway houses and garden suites on the same property as the primary residence, says Rami Miransky, HST rebate specialist with MCO Wealth Management Inc. in Toronto.
Secondary residences, such as cottages, don’t qualify. However, Mr. Miransky says if a client decides to relocate and either build new or substantially renovate their cottage, they’d be eligible for the rebate as long as it becomes their primary residence.
The rebate has a federal portion (GST) and a provincial portion (PST). Federally, the homeowner would receive a maximum of $6,300, but that’s exclusively for new residential units or renovations for which the value of the property is less than $450,000. The provincial portion would also apply.
Mr. Miransky notes that for properties worth more than that value, the client can only apply for the provincial portion of the rebate, which is a maximum of $16,080, an amount that has remained static since 2010.
Mr. Miransky emphasizes that the rebate is not considered income, but is a refund of the HST paid to build or renovate the home.
“You can’t get a rebate if you haven’t paid the HST,” Mr. Miransky says. “If someone pays cash for the entire build or renovation, you can’t claim the rebate.”
To apply, clients need to offer proof of payment (usually various invoices paid to contractors for the renovation) and fill out a lengthy application form. Some pay middlemen like Mr. Miransky to gather all the information and apply on their behalf.
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