MHRTC - A Guide to Choosing Efficient Renovation Solutions

In light of the ageing demographic and housing shortage, many are considering the concept of multigenerational homes. To encourage people to renovate their multigenerational homes or transform their main dwellings into such homes, the Government of Canada initiated the Multigenerational Home Renovation Tax Credit (MHRTC).

This article will shed some light on the following questions:

• Who qualifies for the program?

• How can you claim renovations?

• What renovations are covered by the tax credit?

Then, we’ll examine the factors to consider when building or renovating a multigenerational dwelling—also known as an “intergenerational house” or “bigenerational home.”

Multigenerational Home Renovation Tax Credit (MHRTC) and Eligibility Criteria in Canada

What Is a Home Improvement Tax Credit?

It’s a refundable tax credit available to tax-paying Canadians. Eligible individuals can request a refund for certain expenses incurred during a renovation project aimed at creating a secondary livable unit within a primary dwelling and enabling a person to cohabitate with a qualifying relative.

In other words, this program offers financial assistance, helping individuals build a multigenerational home.

How Does the Multigenerational Home Renovation Tax Credit Work?

The MHRTC is designed to allow qualifying individuals to cohabitate with a qualifying relation.

Who is a qualifying individual? 

A qualifying individual meets the following criteria:

A "qualifying individual" is an individual (other than a trust) who is:

• 65 years of age or older before the end of the renovation period taxation year; or

• 18 years of age or older before the end of the renovation period taxation year for whom an amount is deductible under the "disability tax credit" in computing tax payable for a renovation period taxation year, or would be so entitled if the restriction for attendant care were disregarded.

Source: Government of Canada

Who is a qualifying relation? 

A qualifying relation meets the following criteria:

A "qualifying relation" of a qualifying individual for a renovation period taxation year means an individual who is:

• at least 18 years of age by the end of the year; and

• at any time in the year, a parent, grandparent, child, grandchild, brother, sister, aunt, uncle, niece or nephew of the qualifying individual or the qualifying individual's cohabiting spouse or common-law partner.

Source: Government of Canada

What Type of Dwelling Is Eligible for the Tax Credit?

Here is the definition provided on the Government of Canada website regarding eligible dwellings:

For the purposes of the MHRTC, an "eligible dwelling" is defined as a housing unit located in Canada that is:

• owned (whether jointly or otherwise) by the qualifying individual or a qualifying relation of the qualifying individual (or a trust, if the qualifying individual or a qualifying relation is a beneficiary of the trust) at any time in the renovation period taxation year; and

• where the qualifying individual and a qualifying relation of the qualifying individual ordinarily reside, or intend to ordinarily reside, within 12 months after the end of the renovation period.

The land on which the home is located can be part of the eligible dwelling. Usually, the amount of land that can be considered as part of the eligible dwelling is limited to half of a hectare (1.24 acres). However, if it can be shown that more land is needed to use and enjoy the home, more than this amount can be considered as part of the eligible dwelling. For example, this may happen if the minimum lot size imposed by a municipality at the time the property was acquired is larger than half of a hectare.

How to Submit an MHRTC Request

Are you a qualifying individual who has incurred expenses due to a multigenerational home renovation? First, write down the qualifying amount in your tax returns.

To ensure your request is granted, follow all the criteria outlined in the program description. Here’s a reminder of certain key elements:

• The renovation must have been completed during the taxable year

• You can split the tax credit

• Provide all necessary supporting paperwork

• You cannot claim the same expense for another refund

What Home Renos Qualify Under the MHRTC Tax Credit?

The renovations must be aimed at building a secondary unit within a qualifying dwelling. The eligibility criteria are rather broad, considering that the upgrades can include, but aren’t limited to, the following:

• Structure

• Plumbing

• Electrical

• Flooring

• Home extension/addition

Here’s what you should know to ensure your request is approved:

• You can claim among your expenses services rendered, such as labour costs for different renovations, permit costs or other renovation-related fees, necessary equipment rental

• Make sure your expenditures are reasonable and aren’t amongst non-qualifying renovations (see below)

• Submit your request for the fiscal year during which the renovation occurred

• Keep all invoices and receipts as proof of expenses.

The following expenses don’t qualify:

• Costs related to repair work or annual maintenance

• The purchase of appliances, entertainment electronics

• Costs associated with housekeeping, home security, landscaping, or any other exterior maintenance

• Financing-related fees

• All goods or services provided by a person who isn’t directly dealing with the qualifying individual (unless said person is registered for GST/HST under the Excise Tax Act)

• All expenses listed under reasonable expenses but were already reimbursed

• All expenses that aren’t supported by receipts

• Expenses already claimed as a medical expense tax credit or home accessibility tax credit.

How Much Money Can You Get with the MHRTC?

You can claim up to $50,000 in eligible expenses for a (qualifying) renovation done within the fiscal year in question. This refundable tax credit is 15% of whichever amount is less between payable taxes and qualifying expenditures.

If you claim $50,000 of qualifying expenses, you can receive a $7,500 tax credit. The amount you’ll then receive hinges on the total amount owed when your tax return is calculated in full. 

How to Obtain a Building Permit for a Multigenerational Home Project

Before starting, you must get a building permit, specifically greenlighting the transformation of a single-detached home into a multigenerational dwelling. If you want to get the ball rolling before receiving authorization from your municipality, you could find yourself in quite a pickle afterward. In some cases, homeowners were forced to demolish the secondary dwelling (French only).

It’s all the more important if the transformation involves building two separate units within a single dwelling.

The criteria for obtaining a building permit vary from one municipality to the next. Consult your city's website to ensure you have all the necessary documents. Most of the time, the relevant information is listed. Otherwise, you can contact the concerned authorities via email or telephone.

Sharing a Home with a Senior: Home Accessibility Expenses

Adapted toilets, residential elevator, countertop height: if one of the dwellers is wheelchair-bound or suffers from reduced mobility, the unit must be safely and thoughtfully configured. The latter is all the more important if you wish for the concerned individual to benefit from independent mobility, whenever possible.

On that note, certain criteria have to be respected. For example, unless there’s an elevator inside the home or a chairlift, the individual’s bedroom will likely have to be on the first floor. In the bathroom, you’ll have to install an adapted toilet and accessible shower. Lastly, if the person wants to use the kitchen but is wheelchair-bound, the countertop height will have to be reconfigured and adjusted accordingly.

This is just a taste of the home adaptations needed to ensure your dwelling is comfortable for all residents, including those with mobility limitations.

For more information regarding costs, check out our guide: A Financial Guide for Housing Adaptation - How Much to Budget?

FAQ About Multigenerational Home Renovations

How do you calculate a multigenerational home renovation budget?

It depends entirely on the work needed to convert your home. Is it already equipped to meet the needs of your relatives? Should you build a full, basement apartment? If the project involves a few structural changes, you might be good for a few thousand dollars. On the other hand, if you’re planning on building a fully equipped, separate unit, chances are, you’re looking at hundreds of thousands of dollars. To get a better idea, check out our blog for articles about renovation project costs.

Do multigenerational homes need a second, private entrance?

If the secondary unit is separate from the primary residence, you’ll need a private entrance for both dwellings. In any case, fire safety standards require exterior-leading doors and windows to be easily accessible in the event of a disaster.

Can I build a tiny house in my backyard to put up my relatives?

It depends on the regulations established by your municipality. Some areas are making changes to the bylaws, seeing just how beneficial urban densification can be. However, in most cities, this type of installation has yet to be authorized. Do your research and consult with your local authorities before making any concrete decisions.

Can the MHRTC be split between more than one individual?

Yes. However, the total amount claimed between the qualifying individuals for the same renovation project won’t exceed $50,000.

Can you claim two MHRTC requests in the same year?

Absolutely. If two projects are carried out separately and are both eligible, you can submit a request for both.

What is the $7,500 Canada home renovation credit in April 2024?

The new Multigenerational Home Renovation Tax Credit offers Canadian citizens up to $7,500 for home renovation costs incurred during the 2023 tax year. 

Are all home upgrades and renovations tax deductible (CRA)?

Not all home upgrades are tax deductible. To further familiarize yourself with qualifying renovations, check out the Government of Canada website. Also, note that some tax credits are province-specific.