The article “Are home renovations tax deductible in Canada?” was originally published in MoneySense on August 8, 2022. Photo by Kindel Media from Pexels.
Doing home renovations? Find out if there are any tax incentives that Canadians are able to claim.
We are upgrading our electrical and removing an oil furnace and wood furnace. We are replacing them with a ducted heat pump. So, the question is will we get any tax break where it’s done for home improvement? — Joan
Can I claim home renovations on my taxes in Canada?
There is currently a Canada Greener Homes Initiative that provides both grants and loans for home evaluations and retrofits, Joan.
See the below chart for eligible retrofits.
|Home improvement||Amount||Good to know|
|Space and water heating||Up to $5,000||If a pump is installed in a home by a licensed professional and is on the eligible product list for ground source heat pumps, air source heat pumps or heat pump water heaters, it may qualify. The pump must be purchased in Canada or from a distributor located in Canada.|
|Home insulation||Up to $5,000||Upgrades include attic, cathedral ceiling, flat roof, exterior wall, exposed floor, basement or crawl space.|
|Air-sealing||Up to $1,000||Air sealing any cracks or gaps around the house to regulate air flow.|
|Windows and doors||Up to $5,000||Replace doors, windows, or sliding glass doors with Energy Star-certified models.|
|Thermostat||Up to $50||Add a smart thermostat, when combined with another retrofit.|
|Renewable energy||Up to $5,000||Install a solar photovoltaic system (converts sun rays into energy).|
|Resiliency measures||Up to $2,625||Implement measures to protect your home from environmental damages (combined with another retrofit).|
Also, know that there are other various provincial home renovation tax credits. If you live in British Columbia, Saskatchewan, Manitoba, Ontario, Quebec or New Brunswick, check the appropriate government website for details.
Eligibility for home renovations tax credits
Home renovation grants may save you money on eligible home retrofits. Here are some of the eligibility criteria:
- Your application must be approved by Natural Resources Canada.
- You must do a pre- and post-retrofit EnerGuide evaluation.
- You have to complete at least one eligible retrofit recommended by your energy advisor.
- You have to purchase equipment and products from Natural Resources Canada’s approved products list, specifically for windows and heating equipment.
- Installations must be completed by a licensed professional, except for thermostats.
- All products must be purchased in Canada or from a distributor located in Canada.
Note: There can be expenses related to retrofit eligibility. For example, EnerGuide home evaluations can cost between $500 to $1,000, Joan. However, you can get up to $600 as a grant to put towards this cost. And, you can also apply for interest-free loans of up to $40,000 amortized over up to 10 years.
What home improvements provide tax savings for 2021? What about 2022?
There are many renovation and improvement tax credits. Some are applicable, and some are not. Here’s a breakdown:
Federal Home Renovation Tax Credit
I still get questions about the Federal Home Renovation Tax Credit, which was only available for a single year back in 2009. This was an extremely broad tax credit for all renovations done to your home with virtually no criteria. It’s not relevant to you right now, Joan.
Federal Home Accessibility Tax Credit
There is a Federal Home Accessibility Tax Credit that was introduced in 2016 for those over age 65 or who qualify for the disability tax credit. Renovations of up to $10,000 ($20,000 starting with the 2022 tax year) that improve accessibility or reduce the risk of harm within a home generally qualify. These expenses may also qualify for a medical expense tax credit.
Multigenerational Home Renovation Tax Credit
The 2022 federal budget introduced a Multigenerational Home Renovation Tax Credit for up to $50,000 of renovations for adding a secondary unit to a home for an immediate or extended family member. This credit is expected to begin in 2023.
GST/HST New Housing Rebate & provincial new housing rebates
There is also a GST/HST New Housing Rebate and provincial new housing rebates for substantial renovations where more than 90% of a home is renovated. This generally requires that all or substantially all of the interior of a building, other than structural components, are removed or replaced. The rebate depends on the value of the home and the province where it is located.
Are maintenance fees tax deductible on a rental property?
Repairs and renovations can also provide tax savings each year for a rental property. They may be eligible to claim as current (tax-deductible) expenses or depreciated over time as capital expenses. Renovations also reduce the eventual capital gains tax payable for the sale of a rental property, cottage or a property used for a business. This may or may not be of interest to you, Joan.
You have options
In summary, Joan, your renovation may qualify for a Canada Greener Homes rebate subject to the eligibility criteria, and there are plenty of other ways to save tax on home renovations for other taxpayers too.
Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto, Ontario. He does not sell any financial products whatsoever.