March 8, 2023

Benefit from the New Federal Tax Credit for Multigenerational Homes

Do you want to renovate your house to accommodate a loved one 65 or older or living with a disability? You could benefit from a new federal tax credit. Here’s what you need to know.

Announced during the April 2022 budget, the multigenerational home renovation tax credit officially entered into force on January 1, 2023. This measure is part of the Liberal government’s promise to support affordable housing across the country. It is also used to support Canadians who wish to live with their parents or loved one with a disability, and at the same time, promote home care.

What is the credit?

The tax credit is equal to 15% of the lesser of eligible expenses and $50,000, up to a maximum tax credit of $7,500. It covers expenses related to the renovation or adaptation of a house in order to create a second living space, annexed to the first, for a family member (grandparent, parent, child, grandchild, brother, sister, aunt, uncle, niece or nephew) aged over 65 or living with a disability (benefiting from the disability tax credit). The spouse of the owner could also be eligible, but under certain specific conditions.

Conditions

Certain conditions must be met:

The second dwelling must be independent of the main one and have a private entrance in addition to a kitchen, bathroom and sleeping area.
The second dwelling can be a newly constructed addition or created from an existing space by making modifications so that it meets the requirements mentioned above.
The house hosting the second dwelling must be inhabited by the homeowners for at least one year and the new tenant of the second dwelling must occupy the place within 12 months of the end of the work. If you have owned the property for less than one year, you will not be able to benefit from this tax credit.
The person claiming the credit must be 18 years of age or over.
The credit covers certain expenses such as building materials, equipment rentals, fixtures, permits, cost of labour and professional services. However, the purchase of household appliances, maintenance fees and certain other services would not be eligible.

Through this federal tax measure, estimated at $44 million over the next five years, more Canadians will have access to affordable housing. According to the 2016 Canada census, there are 150,000 Canadians aged 75 and over living in a multi-generational home, which represents 6% of this age group.