Posted on September 6th, 2023 in Domestic Tax

The mid adult woman helps her senior adult friend carefully enter her home.

The multigenerational home renovation tax credit is a refundable tax credit applicable to the costs of constructing a secondary suite for an eligible person (generally a relative either age 65 or over, or eligible for the disability tax credit) to live with a qualifying relation. The tax credit is available on up to $50,000 of eligible expenditures incurred after 2022 at a rate of 15%.

In a March 6, 2023, Technical Interpretation, CRA confirmed that the eligible person must ordinarily inhabit, or be intended to ordinarily inhabit, the new dwelling unit constructed, but does not have to reside with the qualifying relation before the renovations are undertaken.

In a second March 6, 2023, Technical Interpretation, CRA was asked whether the construction of a separate, detached housing unit on the same parcel of land as a principal housing unit, such as a carriage house or laneway house, would be eligible. CRA noted that a qualifying renovation must enable the qualifying individual to reside in the dwelling by establishing a secondary unit within the dwelling. CRA indicated that a second detached housing unit located on the same parcel of land as the primary dwelling unit would be considered to be located within the dwelling (that is, the dwelling would be considered to include the subjacent land) and would qualify for the credit.

CRA noted that all other requirements must be met, cautioning that this includes the second property being permitted under local law and regulations, as many municipalities do not permit detached secondary units.

ACTION ITEM: If building a secondary suite for a family member 65 years of age or older, or eligible for the disability tax credit, check whether you can claim this new credit.

Article originally published in: Tax Tips & Traps 2023 Third Quarter – Issue 143.

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