Recently, Janet and Dave (aged 63 and 66, respectively), approached their BDO advisor with questions about the tax implications of claiming home renovation expenses. While deciding to stay in the home that they raised their family in was easy, the thought of having to renovate it has proven to be more daunting. They explained that Dave’s deteriorating health has now confined him to a wheelchair, and as a result the couple are looking to make several renovations to their home, including widening the doorways for Dave’s wheelchair and making their master bathroom wheelchair-accessible. Note that Dave is eligible for the disability tax credit and this house is the only home owned by the couple.
After receiving a quote from a local contractor, the couple asked their BDO advisor which, if any, of the expenses that they will incur could be claimed for income tax purposes. Specifically, Janet and Dave had heard about the home accessibility tax credit, which is a federal non-refundable tax credit of 15% on up to $10,000 of eligible home renovation expenditures, and want to know whether the renovations that they will be undertaking would qualify. As well, they would like to determine if there are any tax implications associated with hiring a relative to undertake the renovations, rather than an unrelated local contractor.
Are Janet and Dave eligible to claim renovation expenses on their personal tax returns?
The couple’s BDO advisor explained that a taxpayer can claim an amount in respect of eligible expenses incurred for a “qualifying renovation” of an “eligible dwelling”, as long as they are a “qualifying individual”, or an “eligible individual” making a claim for a “qualifying individual”.
To determine their eligibility to claim this credit, the first step would be to determine whether Janet and Dave meet the conditions of being a qualifying individual, or if applicable, an eligible individual. In this regard, a qualifying individual is an individual who is eligible for the disability tax credit for the year or an individual who is 65 years of age or older at the end of a year.
An eligible individual is:
1. a spouse or common-law partner of a qualifying individual; or
2. for a qualifying individual who is 65 years of age or older, an individual who has claimed the “amount for an eligible dependant”, “caregiver amount” or “amount for infirm dependants age 18 or older” for the qualifying individual, or could have claimed such an amount if:
- the qualifying individual had no income;
- for the eligible dependant amount, the individual was not married or in a common-law partnership; and
- for the amount for infirm dependants age 18 or older, the qualifying individual was dependent on the individual because of mental or physical infirmity.
3. If (2) does not apply, an individual who is entitled to claim the disability amount for the qualifying individual or would be entitled if no amount was claimed for the year by the qualifying individual or the qualifying individual’s spouse or common-law partner.
Dave meets the criteria for a qualifying individual since he is both over 65 years of age and qualifies for the disability tax credit. Keep in mind that he is only required to meet one of the conditions noted above; therefore if he did not qualify for the disability tax credit, he would still be considered a qualifying individual due to his age. Furthermore, by virtue of being Dave’s spouse, Janet would be considered an eligible individual. As a consequence, both Dave and Janet would be eligible to make a claim, assuming the other conditions for the credit are met (which are considered further below).
Is Janet and Dave’s home an “eligible dwelling”?
In very general terms, and for purposes of considering Janet and Dave’s situation, an eligible dwelling is a house located in Canada that is either:
- owned (jointly or otherwise) and inhabited by the qualifying individual, or
- owned (jointly or otherwise) by the eligible individual, inhabited by the eligible individual and the qualifying individual, and the qualifying individual does not throughout the taxation year own and inhabit another house in Canada.
Given that Janet and Dave do not own any other home in Canada, the home that they both reside in and that they plan to renovate is considered an eligible dwelling. The couple’s BDO advisor cautioned them that if they were to move in the year, the total eligible expenses in respect of both dwellings cannot exceed $10,000 for the year (i.e. if they were to own both dwellings in that particular year).
What is a “qualifying renovation” and what renovation expenditures are eligible?
The BDO advisor explained that a renovation is considered a qualifying renovation or alteration if it is of an enduring nature and is integral to the home. Specifically, the renovation must allow Dave to gain access to, or to be mobile or functional within, their house or reduce the risk of harm to him within the home or in gaining access to it. Further to that, the renovation expenditures that will qualify for the tax credit are only those outlays or expenses made or incurred during the year that are directly attributable to the qualifying renovation. This generally means that expenses associated with renovations made to widen the doorways for Dave’s wheelchair and to make their master bathroom wheelchair-accessible can be claimed for purposes of the tax credit. Keep in mind that the expenses must be for work performed and/or goods acquired in the tax year.
There are certain expenses that are ineligible for the tax credit. For example, financing costs in respect of the qualifying renovation cannot be claimed. As well, expenses will not be eligible if they arise from services provided by a relative of Janet and Dave, unless that person is registered for GST/HST. In any case, all eligible expenditures must be supported by appropriate documentation including agreements, invoices, and receipts.
Janet and Dave were also happy to learn that the expenses would not be reduced by assistance from the federal or a provincial government, including a grant, forgivable loan, or tax credit. (In this regard, the couple should note that the province in which they reside may also offer provincial tax credits to improve accessibility to their home). Similarly, eligible expenses are generally not reduced by reasonable rebates or incentives offered by the vendor or manufacturer of goods or the provider of services.
What does this all mean?
In Janet and Dave’s situation, a claim can be made for the 15% non-refundable federal tax credit on a maximum of $10,000 per year in eligible expenses incurred in respect of the renovations they will make to ensure that their home is more accessible to Dave. The claim can be made by either Janet or Dave, or split between the two of them on their personal tax returns. To the extent that the renovations to the doorways and bathroom qualify as medical expenses, the expenditures can be claimed both as a medical expense and as home accessibility expenses for income tax purposes.
After speaking with their BDO advisor and learning more about the home accessibility tax credit, Janet and Dave are now more comfortable with their decision to make the necessary renovations to their home.
Your accessibility renovation may differ from Janet and Dave’s. For more details on the types of expenses that are eligible for the home accessibility tax credit and what is considered acceptable supporting documentation, as well as the types of expenses that are not eligible, refer to the CRA’s guidance provided on their website . If you have additional questions about qualifying for the credit, speak to your BDO advisor.
The information in this publication is current as of March 1, 2017.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.