Home renovations made simple
Home renovations are costly and time consuming. There’s the paperwork, finding the right contractor, deciding on a design, figuring out the timeline, and financing the entire process. With the cost of a home renovation in Canada averaging north of $30,000, you might be wondering whether there are ways to reduce costs through a home improvement tax credit.
So, are home renovations tax deductible in Canada? The answer is: it depends. You can claim home renovations on your taxes if you meet certain conditions, such as where you live or the kind of project you’re undertaking. Admittedly, the various reno tax credits and eligibility requirements can be a bit complicated — to say nothing of the home improvement-related loans and grants that abound— but the end result could reduce your overall renovation costs. And those savings can translate to more money in your wallet (or that luxe sofa you couldn’t fit in your original budget).
What qualifies for a home renovation tax credit?
Generally speaking as a homeowner, you can qualify for the various federal, provincial and territorial home renovation tax credits if your renovation has a positive environmental impact, improves the life of someone with a disability or is tailored to help senior Canadians age in their homes.
Of course, not every improvement project qualifies for a home renovation tax credit. If you’re a home renter interested in renovating your rental property, for example, it’s unlikely that you would qualify regardless of whether you obtained the oft-required approvals.
Also — and here’s some quick tax info 101 — there is a distinct difference between a home renovation tax credit and a rebate. The former reduces the amount of taxes owing, while the latter allows you to get back a portion of the tax money you submitted earlier. It’s best to consult with your accountant to get the most up-to-date information on your eligibility, but for the purposes of this guide, we will focus on home renovation tax credits and a couple of high-level rebates. Let’s get started!
At the federal level, there are two different types of home renovation tax credits as well as two home reno-related rebates. All four focus primarily on renovations for senior accommodations or environmental upgrades.
Home Accessibility Expenses Tax Credit (HATC)
Also known as the senior home renovation tax credit, the Home Accessibility Tax Credit is for Canadians over 65 or for those who qualify for the disability tax credit. As of 2022, home renovations up to $20,000 that improve accessibility can qualify. You can learn more about how to qualify (and who qualifies) for this credit here.
Multigenerational Home Renovation Tax Credit
The Multigenerational Home Renovation Tax Credit is available starting in 2023. If you want to add a secondary unit to your home so a family member can live with you (think: an apartment or in-law suite), you can claim a 15 per cent tax credit of up to $50,000 in home renovation and construction costs.
GST/HST New Housing/Substantial Renovation Tax Rebate
Your home renovation may qualify for this rebate if 90 per cent of the residence is renovated, but talk to your accountant and keep your receipts to be sure. That includes all or the majority of the inside of the building apart from structural components. The amount of the rebate depends on the province and the value of the home.
Canada Greener Homes Grant
Part of the Canada Greener Homes Initiative that helps Canadians make where they live more energy efficient, the Canada Greener Homes Grant offers up to $5,600 in rebates for energy evaluations and sustainable retrofits (meaning, adding a new component to or upgrading a current system). This can include things like installing solar panels, replacing doors and windows or adding a smart thermostat. The initiative also includes the Canada Greener Homes Loan, an interest-free loan of up to $40,000 that helps you cover the upfront costs of these projects.
Read more: Understanding the Canada Greener Homes Grant
Each province and territory has its own home renovation tax credit covering a range of scenarios from green upgrades to improvements for people with disabilities. Also worth considering: some regions offer their own provincial tax rebates, as well as home retrofit subsidy programs available directly through your local municipality.
British Columbia: Home Renovation Tax Credit for Seniors and Persons with Disabilities
This BC tax credit is worth up to $1,000 per year and is for seniors or family members who share their home with a qualified senior, regardless of whether you rent or own your place. To qualify, the renovation must be long-lasting (i.e. permanently installed) and a part of the home or its surrounding land. Alternatively, the renovation can be related to the purchase and installation of fixtures that are removable such as modular ramps or non-fixed bath lifts.
Alberta does not offer a home renovation tax credit.
Saskatchewan: Home Renovation Tax Credit
Homeowners can claim a 10.5 per cent tax credit on up to $20,000 of eligible home renovation expenses which can equal savings of up to $2,100 in provincial income tax. Renovations that qualify include labour costs, permits, building materials, fixtures and equipment rentals.
Manitoba: Green Energy Equipment Tax Credit
This home renovation tax credit applies to property owners who make two types of green upgrades:
- a 7.5 per cent tax credit on a geothermal heat pump system made and used in the province
- a 15 per cent tax credit on the rest of the capital costs if the installer is certified by the Manitoba Geothermal Energy Alliance, Inc.
Property owners who install a solar thermal energy system are also eligible for a 10 per cent tax credit on eligible capital costs.
Ontario: Seniors’ Home Safety Tax Credit
Available for the 2021 and 2022 tax years, this temporary, refundable home renovation tax credit is intended to help extend the length of time a senior lives in their principal Ontario residence by improving its safety and accessibility. Spending up to $10,000 on eligible expenses like handrails, a walk-in tub, and wheelchair ramps could be worth 25 per cent per year.
Read more: Top renovation for aging in place
Ontario: New Housing Rebate for Substantial Renovations
Ontario has a housing rebate similar to the federal government for anyone who does substantial renovations (i.e. replacing nearly everything in the home except the foundation and the outside walls) on their primary residence to a maximum rebate of $24,000 (and the purchase of the house is under $450,000.)
Quebec: Upgrading of Residential Wastewater Treatment Systems
Residents of La Belle Province who are thinking of upgrading their wastewater treatment system can get a tax credit up to $5,500. The work must be done by a qualified contractor before April 1, 2027 and paid for in the year covered by the claim.
Quebec: GST/QST Rebate for Substantially Renovated Housing
This rebate applies to owners of new or substantially renovated homes up to $6,300 for GST and $9,975 for QST. A number of conditions must be met to be eligible but include:
- Purchased a new or recently renovated residence (and the land) from a builder, or
- Built a residential unit or hired someone to do it, or
- Substantially renovated your residential unit or hired someone to do it.
New Brunswick: Seniors’ Home Renovation Tax Credit
This refundable personal income tax credit is for seniors and family members who live with them to help cover the cost of improving the home for safety and accessibility. The maximum amount of the credit is $1,000 per tax year and is calculated as 10 per cent of the qualifying renovation expense (maximum $10,000 in eligible expenses).
Nova Scotia, Prince Edward Island, Newfoundland and Labrador do not offer home renovations tax credits for their respective provinces.
Yukon and The Northwest Territories
There are no home renovation tax credits specific to these territories.
This Arctic territory has a Home Renovation Program which helps homeowners cover the costs of renovations through a forgivable loan (meaning part or all of the loan doesn’t need to be paid back, if specific criteria is met). Eligible applicants can receive up to $65,000 to cover the cost of materials, labour and freight, as long as any amount above $50,000 is used specifically for energy efficient improvements.
Tax rebates can save in renovation costs
Whether you want to make your home more eco-friendly, more accessible or envision an entirely new build, taking some time to look into tax credits, deductions, rebates, and grants has the potential to make your dream project much more affordable.
This, of course, means spending money upfront before claiming any deductions, so make sure your renovation budget accounts for all costs and that you have financing in place. Finally, if you’re not sure if your renovations qualify for rebates or tax credits, check with your accountant or a trusted contractor. Just remember to save all your receipts and renovation plans so you can file your claims when tax time comes around!
Smart Reno helps you find trusted contractors
With so much time and money required for a home renovation project, it’s crucial that you hire the right professionals for the job. Smart Reno can help you get up to three free, no-obligation renovation quotes from trusted local contractors, and talk to an expert about renovation financing.
Calculate the cost of your home renovation project with our cost estimator
This article offers general information only and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While the information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or its affiliates.