2020-0873611E5 HATC – New windows

Principal Issues: Whether the amounts paid for new windows, including installation, qualify for the HATC.

Position: Question of fact, see response.

Reasons: The cost of new windows, including installation, is typically the type of expenditure that is made for the purpose of increasing or maintaining the value of the eligible dwelling. However, where the facts of a situation support the view that the primary purpose of the expenditure was incurred to undertake a qualifying renovation, a claim under the HATC may be allowed.

Author: Underhill, Cynthia
Section: ITA: Section 118.041 and 118.3; Paragraph 18.2(2)(l.2); Paragraph 5700(1)(i) of the ITA Regulations..

XXXXXXXXXX                                                                2020-087361
                                                                                         C. Underhill

May 11, 2021

Dear XXXXXXXXXX:

Re: Home Accessibility Tax Credit

We are writing in response to your correspondence received on December 9, 2020, asking about the home accessibility tax credit (HATC).

You explained that a husband and wife in their 80’s would like to replace some of the windows in their 100 year old home. The existing windows are 50 to 60 years old and are extremely difficult to open and close. The home owners are no longer physically able to open or close the existing windows independently. The home has no air conditioning. You asked whether the cost of the new windows, including installation, would qualify as a qualifying expenditure for purposes of the HATC.

Our comments:

This technical interpretation provides general comments about the provisions of the Income Tax Act (the Act) and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R11, Advance Income Tax Rulings and Technical Interpretations.

The HATC allows “qualifying individuals” or “eligible individuals” to claim “qualifying expenditures” paid for “qualifying renovations” made to the individual’s “eligible dwelling” in Canada. In this scenario, either the husband or wife may be entitled to claim an amount for the HATC for any qualifying expenditures in respect of a qualifying renovation. Up to $10,000 in qualifying expenditures can be claimed in a given tax year, which results in a tax credit of up to $1,500 for that year.

The terms qualifying individual, eligible individual, qualifying expenditure, qualifying renovation, and eligible dwelling are all defined in section 118.041 of the Act and explained on the CRA webpage, titled “Line 31285 – Home accessibility expenses” at canada.ca/line-31285.

In general, to be a qualifying renovation eligible for the HATC, the renovation must enable the qualifying individual to gain access to their home, be mobile or functional in their home, or reduce the risk of harm within (or in gaining access to) their home. The renovation must be enduring and integral to the home.

Qualifying expenditures must be directly attributable to a qualifying renovation of an eligible dwelling. The qualifying expenditures can include the cost of labour and professional services, building materials, fixtures, permits, and equipment rentals used in the course of the qualifying renovation.

A qualifying expenditure excludes an expense that is “made or incurred primarily for the purpose of increasing or maintaining the value of the eligible dwelling”.

It is a question of fact whether a specific expenditure is incurred with the primary purpose of increasing or maintaining the value of the eligible dwelling. Where the primary purpose for incurring an expense is to undertake a qualifying renovation, the expense will not cease to be a qualifying expenditure for the sole reason that it may increase the value of the eligible dwelling. Conversely, where the primary purpose for incurring an expense is to increase or maintain the value of the eligible dwelling, such an expense would not be considered a qualifying expenditure for the purpose of the HATC.

In our view, the cost of new windows, including installation, is typically the type of expenditure that is made for the purpose of increasing or maintaining the value of the eligible dwelling. However, where the facts of a situation support the view that the primary purpose of the expenditure was incurred to undertake a qualifying renovation, a claim under the HATC may be allowed, provided all the conditions of the provision are met, up to a maximum of $10,000 per year.

We trust that these comments will be of assistance to you.

Yours truly,

Lita Krantz, CPA, CA
Manager, Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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