Glossary
Multigenerational Home Renovation Tax Credit
A federal non-refundable tax credit that offsets part of the cost of renovating a home to create a secondary unit for a qualifying family member..
The Multigenerational Home Renovation Tax Credit is a federal non-refundable tax credit that helps offset the cost of renovating a home to create a secondary dwelling unit so a qualifying family member can live with the homeowner. It is administered by the Canada Revenue Agency (CRA) and claimed on the personal tax return for the tax year in which the renovation is completed.
How the credit works
Because it is non-refundable, the credit reduces federal tax otherwise payable rather than producing a payment on its own. It is calculated as a set percentage of eligible renovation expenses, up to a maximum eligible amount set out in the Income Tax Act — confirm the current percentage and cap on the CRA website before budgeting. Eligible costs generally include design and construction work, building materials, fixtures, permits, and professional services; routine maintenance, appliances, and landscaping are typically excluded.
The claimant is usually the qualifying individual, commonly a senior or an adult with a disability, or a qualifying relative who owns or inhabits the home. The unit must be used as the qualifying individual's principal residence for the period CRA requires, and receipts, permits, contracts, and proof of the relationship should be retained in case the claim is reviewed.
What counts as a secondary dwelling unit
CRA expects a self-contained unit, meaning its own entrance (or a separate entrance through a common area), kitchen, bathroom, and sleeping area, constructed to local building code with the necessary permits. Municipal zoning and secondary suite rules apply first, so a renovation that cannot be legally permitted will not qualify. Where a renovation substantially rebuilds a residential unit, the GST/HST New Housing Rebate may also be worth reviewing. Both measures involve detailed conditions, so a qualified tax professional should confirm the specifics.
Why it matters for mortgage planning
The credit is a tax measure, not a grant or a loan, so the homeowner generally pays for the renovation first and claims the credit later. Common ways to fund the work include a refinance, a home equity line of credit secured against existing equity, or a purchase plus improvements mortgage when the renovation happens at the time of purchase. A completed secondary unit may also raise appraised value, but lenders examine the legal and rental status of a suite carefully before counting any income. It is also worth comparing this credit with other homeowner tax measures and reviewing the wider true cost of owning a home in Canada before committing to a renovation budget.
Frequently asked questions
Is the Multigenerational Home Renovation Tax Credit refundable?
No. It is a non-refundable credit, so it can only reduce federal tax you otherwise owe for that year. If the calculated credit is larger than your tax payable, the excess is not paid out. Because every claimant's tax situation differs, confirm eligibility and the current rules with the CRA or a qualified tax professional.
Can I claim the credit if I build a basement apartment for my parent?
Possibly, if the renovation creates a self-contained secondary dwelling unit with a separate entrance, kitchen, bathroom, and sleeping area, satisfies local building and zoning rules, and the qualifying individual lives there as their principal residence for the required period. Keep receipts, permits, and contracts. Confirm the specifics in current CRA guidance.
Can the credit help with my mortgage down payment?
Not directly. The credit reduces federal tax payable after the renovation is completed and claimed, so it arrives later than a down payment would. Borrowers commonly fund the work with a refinance, a home equity line of credit, or a purchase plus improvements mortgage, then claim the credit for the tax year the renovation is finished.
Sources
Related terms
- Purchase Plus Improvements — A purchase plus improvements mortgage finances both the home purchase and planned renovations in a single mortgage, with the renovation funds held back until the work is done.
- GST/HST New Housing Rebate — A federal rebate that returns part of the GST or HST paid on certain new or substantially renovated homes used as a primary residence.
- Home Equity Line of Credit (HELOC) — A revolving credit line secured by your home, usually capped at 65% loan-to-value and typically priced off the lender's prime rate.
- Construction Mortgage — A construction mortgage, also called a draw mortgage, advances funds in stages as a build progresses rather than in one lump sum at closing.
- Home Buyers' Amount — A federal non-refundable tax credit claimed by eligible first-time home buyers on their personal tax return for the year they acquire a qualifying home.