What is it you long for in your home? More space, a different layout that can accommodate your changing needs, or a more energy efficient home? The best thing to do is locate a reputable contractor, set a budget carefully, and research 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,” says Jeff Schwartz, executive director, Consolidated Credit Counseling Services of Canada. “If you build your plans to include any eligible home renovation tax credits, you can use any tax refund you get back to help pay down the debt that you incur.”
“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,” he says.
Health-related home renovations
If you are a senior or have a disability, there are several 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, and make them more accessible for those with 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
Making your home more airtight and environmentally friendly will save you money in operating costs, and you might be eligible for several tax breaks, depending on the improvements that you employ.
There are also several grants and incentives available at the provincial level, for things like energy efficient windows, appliances and a heating and cooling system.
Work space in the home expenses
Do you have a rental suite or a home office that you work from? 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.
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.