What is it you long for in your home? More space? A different layout that can accommodate your changing needs? A more energy efficient home? Not only should you locate a reputable contractor and carefully set a budget, you need to do research on which improvements can make you eligible for home renovation tax credits.
“Although home renovations can be considered “good debt”, you can minimize your debt and build more wealth at the same time by being selective and strategic. If you build your plans including any eligible home renovation tax credits, you can use any tax refund you get back to help pay down the debt that you incur,” says Jeff Schwartz, executive director, Consolidated Credit Counseling Services of Canada.
“As a general rule, tax credits are not awarded simply for renovations or repairs, but there are exceptions and it’s worth your while to investigate,” says Schwartz.
Health related renovations
If you are a senior or have a disability, there are a number of tax credits and rebates available, depending on where you live.
At the Federal level, there is the Home Accessibility Tax Credit, which provides tax credit for seniors and people with disabilities to renovate their homes to make them more accessible or less dangerous to accommodate disabilities.
There are also tax benefits available at the provincial level, depending on where you live, so it’s worth investigating. You may be eligible for both.
Green your home
Not only will making your home more airtight and environmentally friendly save you money in operating costs, you might be eligible for a number of tax breaks, depending on the improvements that you employ.
There are also a number of grants and incentives available at the provincial level, for things like energy efficient windows, appliances and heating and cooling system. Click here to learn more.
Does your home provide income?
Do you have a rental suite or a home office that you work from at home? Improvements to either of these may be eligible for tax deductions, because they are tied to deductions for your income.
Principal Residence Tax Exemption
If you are considering home improvements just to update your home or to increase its value as an investment, there is an important tax exemption that you should know about when you go to sell your home.
Your home is an investment, and you are required to pay tax when your investments increase in value. This is important information if selling your home is part of your plan. The Government does allow you to sell your home tax-free, but you need to report its sale on your tax return. You also need to designate it as your principal residence. This reporting structure is part of the new tax policy introduced in late 2016.
These policies are meant to crack down on people that own multiple properties and are not accurately reporting their activity, but average single-home homeowners are still impacted.
Trying to take advantages of the resources available to you to pay down debt? We can help you to devise a plan. Call us at or start with our online debt analysis.