Embarking on a home renovation is a major investment so it’s always a nice treat to get a break on your income taxes. Getting rebates or tax credits can be a real relief to many homeowners especially when you are looking to renovate or make improvements to your home. Tax credits are a reward for homeowners who choose to renovate their homes so it’s more environmentally friendly and it runs more efficiently.
What’s a tax credit?
If you file an income tax return, you are potentially eligible to receive a tax credit. You may receive a tax credit for the following reasons:
- If you’re enrolled in school
- GST/HST tax credit
- Buying or improving your home
Home improvement tax credits are available for upgrading your electrical system, installing solar panels, or changing an old heating system over to renewable resources. There are tax credits available from the provincial and federal governments.
If you are renovating your home, these tax credits come out of the money you may owe on your annual income tax return. Nonrefundable, refundable, and partially refundable are the 3 basic types of tax credits.
Refundable credits help taxpayers because they are paid out in full.
A nonrefundable tax credit works to reduce the amount of tax you owe down to nothing, but you don’t actually get a refund.
Ontario Home Renovation and Improvements Tax Credits
Renovations are not cheap, but often necessary. While these improvements can increase the value of your home, and make you more comfortable, it’s little relief when you have to pay for them. If you renovated your home this year, you will be eligible for a Canada Home Renovation Tax Credit. Renovations and improvements can be credited when you file your income tax at the end of the year.
You may also be able to apply for home renovation grants in Ontario if you are looking to install solar panels or renovate your home to make it more accessible. Making your home more accessible and functional makes you eligible for the Home Accessibility Tax Credit. Making your home more accessible makes your space easier to navigate for someone with mobility issues.
Multigenerational Home Renovation Tax Credit
If you are building an extra space for a loved one, you are eligible for the multigenerational home renovation tax credit. This covers adding a suite to your home or renovating your basement for a family member. If you are adding space for someone in your family who needs care and lives with disabilities, you can qualify for the multigenerational home renovation tax credit.
This covers your basement or your property outside of the main home. As long as the renovations are being made to accommodate your family member, then the renovations can be a part of your existing home or a separate dwelling on the same property. This tax credit does not cover any maintenance that you may need after the renovations are complete, appliances, or even the initial financing needed to begin the renovations.
Federal Home Accessibility Tax Credit
If a member of your family is suffering from a disease or illness, you may need to make home renovations to make your home more accessible for them. Not only is there a tax credit, but you may also be able to apply for a home renovation grant in Ontario. These renovations may include making doorways wider to accommodate a wheelchair, adding ramps, and easy-access showers or bathtubs. You may need to lower certain counters and cabinets for easier access.
There is a limit that you can claim per year, but it will be expensive to make these home renos so it is well worth your while to look into the tax credits that are available. You can claim any renovations made to make your home more accessible and safer for a family member. This includes building permits and contractors, but not the labour or the tools that may have been used.
Canada Greener Homes Grant
Any new home built today will be much greener than homes built even 10 years ago. This is not only better for the environment, but it saves you a lot of money in your annual expenses for heating, and overall energy use. The Canada Greener Homes Initiative provides grants and a loan for home evaluations and renovations. This can include new doors or windows, smart systems, air sealing, and moving to renewable resources like solar panels.
Beginning next year, there will be changes made to this, but for now, homeowners in Ontario can still use the Canada Greener Homes Grant website for new and existing applications. All the work and renovations you are considering must be done by a licensed and reputable contractor. In order to qualify for the Canada Greener Homes Grant, you need to prove that they were installed by a professional.
Save Money While Renovating Your Home
Applying for grants before you start renovations is a great way to save money with your home renovations. If you are 65 or older, or if you are making renovations to accommodate a family member who needs help, you can receive grants.
These are in place if you need to make your home more accessible or safer for someone who lives with a disability. This could include adding ramps, making doorways and rooms more accessible, or a chairlift.
There are tax credits available for improving water systems, energy sources, and making your home more energy-efficient. You also need to stick to a budget and get a few quotes for the work before you start.
FAQs
The deductions available for home improvements in Canada will depend on where you live. Each province has its own tax credits specifically for home renovations.
If you are eligible for home improvements tax credits and you don’t use them all, you can often carry them over until the next year. These are often shareable with a spouse or partner in the home.
In Ontario, seniors can receive a tax credit for improvements made to their homes to improve safety and functionality. This covers a wide range of home renos like bathrooms, railings, fixing stairs, adding ramps, and even installing smoke detectors.
For those people in Ontario who made significant home improvements, they can claim a rebate on the HST they paid. This covers all the materials and construction. This also applies to those who bought a new house this year.
You are eligible for the home renovation credit if you make changes and renovations to your home for 2023. There are several different categories for renovations that qualify you for deductions by the Canada Revenue Agency.
Some of the new ones are the Home Accessibility tax credit and the Multigenerational Home Renovation tax credit. Making your home safer and more accessible has been increased for 2023.
Adding a ramp or a chair lift, changing an existing bathroom to make it more accessible with a new walk-in tub or shower stall, and widening doorways are all considered for the tax credit.
You may also be eligible for the Multigenerational Tax Credit. This is for individuals who need to build an addition, renovate a space to add a room or suite, or add an extra space outside of the home to accommodate an ailing family member. Eligible persons include seniors who are 65 years of age or older and adults with disabilities who are 18 years of age or older at the end of the taxation year.
As people age, this is becoming a popular area of home renovation. Younger people may have difficulty making ends meet and they also may have an aging parent or grandparent who needs assistance or they wish to keep close.
Making home renovations to make your home more efficient or safer allows you to qualify for tax credits. In order to be eligible you must at least partially own the residence where the renovations are taking place.
You can perform the work yourself and still deduct the costs of your building materials, plans, and permits. But if you hire a professional contractor, you will also be able to claim this as an expense. It is recommended that you use a professional.
You file for these tax credits when you fill out your yearly income tax returns. You can also claim a rebate for the HST you paid for the construction and the materials.
For the Canada Greener Homes Grant in Ontario, as of 2023, you will need to apply through Enbridge Gas’s enhanced Home Efficiency Rebate Plus (HER+) program.
Contact Us
Home renovations are expensive, but they can also be a necessity for you and your family. If you need to make your home safer or more energy efficient, then you don’t need to shoulder the cost alone. If you need more information about tax credits or you want to book a consultation, contact us here at Black Pearl Custom Homes. We cover everything from plumbing to permits.