Most older Canadians would prefer to stay in their own homes for as long as possible—so-called “aging in place”. Staying in one’s own home throughout retirement has a number of strong points—a familiar environment in a familiar community and, most often, more privacy, independence, and autonomy. There are financial advantages, as well, to aging in place. Care provided in an assisted-living setting (whether a retirement home, a long-term care facility, or a nursing home) is expensive. And, while home ownership means expenses as well, for most retirees the biggest home-related cost—mortgage payments—are no longer a concern.
Individuals who can no longer live easily or safely in their own homes are faced, essentially, with two options. They can move, whether to another residence which better suits their needs or to an assisted-living facility or, if possible, they can alter their existing home to meet their current or anticipated future needs.
Beginning with the 2016 tax year, Canadians aged 65 and older and persons who qualify for the disability tax credit will be able to get some help through our tax system to help offset costs incurred for making their homes easier or safer to live in. That help will be provided through a program announced in this year’s federal Budget: the Home Accessibility Tax Credit (HATC). Although the rules governing this credit are detailed, the essence of the program is that Canadians who are aged 65 and older or who are disabled will be able to claim a 15% non-refundable tax credit for expenditures made to increase the accessibility or safety of their homes, or their mobility within those homes. The maximum expenditure which will qualify for the credit is $10,000 per dwelling. That maximum expenditure will reduce federal tax payable for the year by $1,500.
While the new credit is targeted to seniors and disabled individuals, it can also be claimed by their family members. Specifically, the HATC can be claimed by a qualifying individual’s spouse or common-law partner, or by his or her parent, grandparent, child, grandchild, brother, sister, aunt, uncle, niece, or nephew, or such relatives of the individual’s spouse or partner. As well, the credit can be split among these eligible individuals, as long as the total expenditure for which a credit is claimed is not more than the $10,000 per-dwelling limit.
The definition of what constitutes an eligible dwelling for purposes of the credit is equally broad. Essentially that definition encompasses all types of housing units, as long as the housing unit is being used by the senior or disabled person as his or her principal residence. Consequently, the HATC can be claimed for qualifying expenditures made to alter a house owned by the senior or disabled person, or units in a condominium or co-operative housing corporation.
In some cases, an elderly parent or grandparent or a person with a disability lives with another family member. In such instances, qualifying changes made to the home can qualify for the credit, as long as that home is the principal residence of the family member and the senior for whose benefit the expenditures are being made ordinarily lives there.
The number and kind of improvements and renovations which can be made to a home are, of course, almost infinite. The rules governing the HATC do not outline specific changes which will qualify—rather, the test for whether an expenditure does qualify for the credit is the general one of whether the change made makes it easier for a senior or disabled person to access the home or to have greater mobility within the home, or increases their safety within that home. The rules do, however, list a number of types of expenditures which cannot qualify for the HATC in any circumstances. That list of non-qualifying expenditures is as follows:
- expenditures made with the primary intent of improving or maintaining the value of a dwelling;
- the cost of routine repairs and maintenance normally performed on an annual or more frequent basis;
- expenditures for household appliances and devices, such as
- payments for services such as outdoor maintenance and gardening, housekeeping or security; and
- the costs of financing a renovation (e.g., mortgage interest costs).
Home renovations, of almost any kind, aren’t cheap, and making renovations which qualify for the credit will still require an outlay of funds. However, for many seniors and disabled individuals, even small changes which aren’t prohibitively expensive, like the installation of a grab bar or shower seat in a bath, or a change to “touchless” taps, or the addition of a handrail or lighting in halls or stairs, can make a huge difference to their ability to remain living safely and comfortably in their own, familiar homes.
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.