As housing needs evolve in Ontario, more families are embracing multigenerational living. Whether it's to support aging parents, accommodate adult children, or simply to be closer to loved ones, creating a space for family is a growing trend. To support this, the Government of Canada introduced the Multigenerational Home Renovation Tax Credit (MHRTC).

This valuable credit is designed to help with the cost of creating a secondary suite for a family member. However, the eligibility rules are very specific. Who qualifies? What kind of renovation is covered?

This guide will walk you through everything you need to know about the MHRTC to see if you can save up to $7,500 on your renovation project.

What is the Multigenerational Home Renovation Tax Credit?

The MHRTC is a refundable federal tax credit that allows you to claim 15% of your qualifying renovation costs, up to a maximum of $50,000 in expenses.

  • Maximum Expenses: $50,000

  • Credit Rate: 15%

  • Maximum Credit: $7,500 ($50,000 x 15%)

This means if you spend $50,000 or more on an eligible renovation, you could get $7,500 back on your tax return. A refundable credit is particularly powerful because you get the full amount back, regardless of how much income tax you owe.

The Four Key Eligibility Tests

To successfully claim the MHRTC, you must meet four specific criteria related to the person moving in, the person claiming the credit, the type of renovation, and the expenses themselves.

1. Who is a "Qualifying Individual"?

The secondary suite must be built for a "qualifying individual," who is defined as:

  • An individual who is 65 years of age or older at the end of the renovation period tax year, OR

  • An individual who is 18 years of age or older and is eligible for the Disability Tax Credit (DTC).

The person moving into the new unit must be a parent, grandparent, child, grandchild, brother, sister, aunt, uncle, niece, or nephew of you or your spouse/common-law partner.

2. Who is an "Eligible Person"?

This is the person who claims the credit. You are an "eligible person" if you are a homeowner who is undertaking the renovation and you are related to the "qualifying individual" as described above. The qualifying individual can also claim the credit themselves.

3. What is a "Qualifying Renovation"?

This is the most critical rule. The renovation must result in the creation of a new, self-contained secondary unit within the existing home. A simple bedroom renovation does not count.

To be considered a "secondary unit," it must have:

  • A private entrance

  • A kitchen

  • A bathroom

  • A sleeping area

The renovation can be a new addition to your home or a conversion of an existing space (like a basement). The key is that it must create a complete, independent living unit.

4. What are "Qualifying Expenditures"?

These are the actual costs you incur for the renovation. They can include:

  • The cost of goods, such as building materials and fixtures.

  • The cost of services, such as labour from electricians, plumbers, and carpenters.

  • The cost of permits and professional services (e.g., architects, draftsmen).

Expenses must be supported by receipts and invoices. Costs for routine repairs, maintenance, or items like furniture and appliances are generally not eligible.

A Practical Example: The Silva Family

  • The Situation: The Silva family wants to have Maria, their 70-year-old mother, move in with them. They decide to convert their large, unfinished basement into a self-contained apartment for her.

  • The Cost: The total renovation costs $60,000 for framing, plumbing, electrical, a small kitchen, a full bathroom, and a separate entrance.

  • Eligibility Check:

    • Maria is a qualifying individual (over 65).

    • The Silvas are eligible persons (her children).

    • The project is a qualifying renovation (it creates a new secondary unit).

    • Their costs are qualifying expenditures.

  • The Credit: The Silvas can claim 15% on the first $50,000 of their expenses. They will receive a $7,500 refundable tax credit when they file their taxes.

Your Next Steps

The Multigenerational Home Renovation Tax Credit is a fantastic opportunity for Ontario families to adapt their homes for the future. However, careful planning is essential to ensure you meet all the CRA's requirements.

Before you begin your project, it's crucial to consult with both a qualified contractor and a tax professional.

 

If you're considering buying a home with the potential for a secondary suite or want to understand how a multigenerational renovation could impact your property's value, our team has the expertise to guide you. Contact us today to explore your options.