Home Renovation Tax Credits Available in Canada

In this article, nesto’s Tvine Donabedian will share their knowledge of the renovation tax credits that are currently available to Canadian homeowners and offer unique insight on how they can save big on their next home renovation. 

As one of our esteemed and valuable partners, nesto is a digital mortgage lender that is committed to offering a streamlined financial service. nesto’s thorough understanding of the financial landscape enables them to provide clients with a transparent and positive financing experience.

Dreaming of a new kitchen or a brand new office space? If you're a homeowner looking for ways to save on the cost of your renovations, then you may want to look into tax credits available in Canada. Although there's no single answer when it comes to how much money you can actually save from renovating and taking advantage of these tax benefits, the amount can be substantial — plus it's one less expense on your already full plate!

In this blog post, we'll cover some commonly asked questions about claiming renovation tax credits in Canada and provide some insight into potential savings opportunities. Ready? Let's get you those countertops!

What is a Home Renovation Tax Credit?

The federal home renovation tax credit allows Canadian homeowners to qualify for tax deductions related to certain types of home renovations. There are various categories of home renovations that the Canadian government will partially reimburse you for and new categories are often added. All you have to do is claim the expenses on your taxes! Here are a few federal home renovation tax credits that became available to Canadians over the past year.

Multigenerational Home Renovation tax credit

The Multigenerational Tax Credit applies to homeowners who are living with a senior over 65 in their primary residence. With rising interest rates in the current housing market, younger people are struggling to afford homes and multigenerational homes are becoming more common. 

For this reason, the government is proposing a 15% non-refundable tax credit on home renovations up to $50,000 to make homes more accessible to elderly or disabled family members. More so, it is to renovate an existing home to accommodate a multigenerational living situation. This tax credit applies especially to the creation of extra suites or rooms in an existing house, in order to create more space for additional occupants.

Canada Greener Homes Grant

While not exactly a tax credit, the greener homes grant offers a non-refundable, non-taxable sum of $5,000 for retrofits to make a home more energy efficient. Newly built homes are not eligible for this grant, but if you live in an older house and want to replace your old furnace that is driving your energy bill up or doors and windows that don’t insulate like they used to, this grant is the way to go!

Ontario Home Renovation Tax Credits

Besides the federal home renovations tax credits, Canadian provinces often have their own options for homeowners looking to renovate. Here are a few home renovation tax credits available in the province of Ontario. Plus, with property taxes increasing drastically in Toronto in 2023, knowing what home renovations will get you a tax credit will do wonders for your budget.

Seniors’ Home Safety Tax Credit

The Home Safety tax credit in Ontario is reserved for seniors who are making safety renovations to their homes in order to prevent accidents and injuries. Eligible applicants must be 65 years or older and living in their primary residence. With a 25% deduction rate for up to $10,000 of spending, this is a great way to save on important changes in your home, including rails on staircases and in bathrooms, installing smoke alarms, ramps, widening entrances, and more.

New Housing Rebate for Substantial Renovations

Residents of Ontario who purchase a home and renovate it drastically, can now benefit from this renovation tax credit. This new housing rebate for substantial renovations allows residents of Ontario to recoup between $16,000 - $24,000 on HST paid. 

Expenses like labour and material costs associated with renovation can amount to a significant sum, so taking advantage of this renovation tax credit is a great opportunity for any homeowner looking to make sizable improvements on their property. It offers those considering renovating their homes the incentive they need.

In order to claim this rebate:

• The house must be your principal residence
• The renovation project must have taken place within the past 2 years
• The renovation must fall within one of the following categories:
  - You built an entirely new home on land that you own;
  - You changed 90% of the interior of your existing home; or
  - You built a major extension or addition to your existing home that doubles its size

Quebec Home Renovation Tax Credits

Here are a few home renovation tax credits available in the province of Quebec.

Tax Credit for Upgrading Residential Wastewater Treatment Systems

Quebec homeowners can deduct up to $5,500 from their income taxes if they renovated their home’s wastewater system, such as the installation of a new septic tank. This tax credit offers a 20% refund on any such renovation over $2,500.

Rebate for Substantially Renovated Housing

Quebec residents who undertake a substantial renovation of their property may be eligible for renovation tax credits. Under this program, the government will offer up to 35% of GST and 50% of QST paid as a maximum rebate, translating to a rebate of $6,300 and $9,975 on GST and QST respectively. 

However, under the renovation tax credit program, renovation work needs to exceed 90% of the existing building structure in order to qualify. Additionally, once the fair market value after renovation exceeds $350,000 or $200,000 (depending on whether you applied for GST or QST rebate), the rebate starts to phase out until hitting cap values of $450,000 and $300,000 (GST & QST respectively).

Final Thoughts

There are a few things to keep in mind when it comes to claiming renovation tax credits in Canada, but overall the process is relatively straightforward. By taking advantage of these credits during tax season, you can save yourself a significant amount of money on your next home renovation project.

So if you're planning some renovations in the near future, be sure to get a quote from a qualified contractor and take advantage of the potential savings!