Taxpayers claiming the multigenerational home renovation tax credit for building a secondary unit in their home for a family member may risk losing access to the principal residence exemption for that part of the home when they sell it. The credit took effect in 2023 and offers a refundable tax credit of 15% on eligible expenses up to $50,000.
Meeting the requirements to claim the multigenerational home renovation tax credit would generally disqualify the taxpayer from designating the entire home as a principal residence, according to the Canada Revenue Agency .Taxpayers who claim the multigenerational home renovation tax credit when building a secondary unit in their home for a family member may be at risk of losing access to the principal residence exemption for that part of the home when they sell it.
However, meeting the requirements to claim the tax credit would generally disqualify the taxpayer from designating the entire home as a principal residence, according to the Canada Revenue Agency . A high-income individual subject to a 50-per-cent income tax rate who can’t use the PRE against even $30,000 of the gain realized on the sale of a home would have a tax liability of $7,500, he says. That would eliminate any benefit from claiming the multigenerational home renovation tax credit.
The Globe asked the CRA the circumstances under which a taxpayer could qualify for the tax credit, which requires that the secondary unit be self-contained, and demonstrate that the two housing units were integrated for the purposes of the PRE. The credit is available for eligible renovation expenses incurred in 2023 and beyond toward the construction of a secondary unit. It can only be claimed in the year the renovation is completed.
Canada Revenue Agency Multigenerational Home Renovation Tax Credit Principal Residence Exemption Tax Credit Family Member
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