2023-0960661E5 MHRTC

Principal Issues: Whether the amounts paid to renovate a bathroom in a rental property where a taxpayer’s adult son with a disability resides, but is not the taxpayer’s principal residence, would qualify as an eligible renovation for the purposes of the Multigenerational Home Renovation Tax Credit.

Position: Question of fact, amounts paid for a bathroom renovation may qualify for the MHRTC, provided all the requirements of the provisions are met.

Reasons: Under subsection 122.92(1) a qualifying renovation is one that creates a secondary unit in the dwelling to permit a qualifying individual to live with a qualifying relation. In addition, in order to be considered an eligible dwelling, the housing unit must be ordinarily inhabited, or intended to be ordinarily inhabited, by the qualifying individual and a qualifying relation of the qualifying individual within 12 months at the end of the renovation period. Therefore, both the qualifying individual and a qualifying relation need to inhabit the housing unit within 12 months at the end of the renovation period.

Author: Underhill, Cynthia
Section: ITA: Section 122.92, Subsections 122.92(1), (3) and (4).

XXXXXXXXXX                                                                    2023-096066
                                                                                            C. Underhill

February 7, 2023

Dear XXXXXXXXXX:

Re: Multigenerational Home Renovation Tax Credit - amounts paid to renovate a bathroom

We are writing in response to your email dated January 12, 2023, asking if the cost of renovating a bathroom in a rental property would qualify for the Multigenerational Home Renovation Tax Credit (MHRTC).

You explain that your adult son with a disability currently resides in the rental property that you own. You do not live in the same residence as your son. You asked whether you or your son are entitled to claim the MHRTC for the cost of renovating the bathroom in the rental property.

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 70-6R12, Advance Income Tax Rulings and Technical Interpretations.

The MHRTC is a new refundable tax credit that allows eligible individuals to claim certain qualifying expenditures paid for a qualifying renovation made to an eligible dwelling . Up to $50,000 in qualifying expenditures can be claimed for a qualifying renovation, which results in a refundable tax credit of up to $7,500.

The rules for the MHRTC can be found in section 122.92 of the Act. The terms eligible dwelling, qualifying renovation, secondary unit, eligible individual, qualifying individual, and renovation period taxation year are all defined in subsection 122.92(1) of the Act.

An eligible dwelling means a housing unit located in Canada, that is owned (either jointly or otherwise) by the qualified individual, the spouse or common-law partner of the qualified individual or a qualifying relation in respect of the qualified individual. The dwelling must be where the qualified individual and a qualifying relation in respect of the qualified individual ordinarily reside, or intend to ordinarily reside, within twelve months after the end of the renovation period.

A qualifying renovation means a renovation or alteration of, or addition to, an eligible dwelling that is of an enduring nature and integral to the eligible dwelling. The renovation is undertaken to allow the qualifying individual and a qualifying relation to reside together in the dwelling, by establishing a secondary unit within the dwelling for occupancy by the qualifying individual or the qualifying relation.

A secondary unit means a self-contained unit with a private entrance, kitchen, bathroom facilities and sleeping area.

Therefore, a qualifying renovation is one that creates a secondary unit within the dwelling to permit a qualifying individual to live with a qualifying relation.

An eligible individual in respect of an eligible dwelling includes:

* an individual who ordinarily resides, or intends to ordinarily reside, in the eligible dwelling within 12 months after the end of the renovation period in respect of a qualifying renovation of the eligible dwelling and who is:

    (i) a qualifying individual,

    (ii) the cohabiting spouse or common-law partner of a qualifying individual at any time in the renovation period taxation year,
          or

    (iii) a qualifying relation of a qualifying individual; or

* an individual who is a qualifying relation of a qualifying individual, and who owns the eligible dwelling

A qualifying individual is defined as an individual who is 65 years of age or older at the end of the renovation period taxation year or an individual who is 18 years of age or older at the end of the renovation period taxation year who is eligible for the disability tax credit (DTC).

The renovation period taxation year means the tax year in which the renovation period in respect of the qualified renovation ends.

For the purposes of this credit, a qualifying relation includes an individual who has reached 18 years of age before the end of the renovation period taxation year and is a parent, grandparent, child, grandchild, brother, sister, aunt, uncle, niece or nephew of the qualifying individual or their spouse or common-law partner

The MHRTC is available for amounts paid for work performed or goods acquired after December 31, 2022.

It is a question of fact as to whether the rental property meets the definition of an eligible dwelling as defined in the provisions of the MHRTC. If your son does not ordinarily reside, or intend to ordinarily reside, within twelve months after the end of the renovation period, with a qualified relation as described above, the property will not be considered an eligible dwelling, and the MHRTC cannot be claimed.

If the property is considered an eligible dwelling, you must also consider whether the renovation would be considered a qualifying renovation. If the bathroom renovation is not undertaken to create a secondary unit in the dwelling to enable your son to live with a qualifying relation, then it will not be considered a qualifying renovation, and the MHRTC cannot be claimed.

Where the renovation is undertaken to make the bathroom more accessible without creating a secondary unit, the renovation will not qualify for the MHRTC. In such cases, the bathroom renovation may qualify for the home accessibility tax credit (HATC). The HATC is a non-refundable credit for eligible home renovation or alteration expenses that allow a qualifying individual to gain access to, or to be mobile or functional within the eligible dwelling or reduce the risk of harm to the qualifying individual within the dwelling or in gaining access to the dwelling. Up to $20,000 in qualifying expenditures can be claimed in a given tax year, which would provide a tax credit of up to $3,000. For more information about the HATC, see the CRA webpage, titled “Line 31285 – Home accessibility expenses” at canada.ca/line-31285.

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

Yours truly,

Eric Wirag, CPA, CMA
Acting Manager, Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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