When applying for the home accessibility tax credit (HATC), valued at 15% of up to $10,000 in expenditures per year, does it matter if the renovation increases the value of my home? Yes, and No.
In a December 12, 2019 Tax Court of Canada case, at issue was whether the taxpayer was eligible for a HATC claim for $10,000 of qualifying renovations for the 2016 year, the first year of this credit. The taxpayer’s spouse was 76 years old and suffered from reduced mobility. The taxpayer incurred $11,000 in renovation costs at the taxpayer’s home to remove steps the Court referred to as “rickety” and which had no railing or landing area with a very sturdy deck including a 5-foot wide stairway and aluminum railings.
CRA denied the claim on the basis that the renovations did not meet the definition of a “qualified renovation” and even if they did, they would be ineligible as they were made to enhance or maintain the value of the house. Note that a taxpayer is precluded from claiming the HATC where the primary intention of the renovation is to increase or maintain the value of the property. There was no dispute as to the wife being an “eligible individual”, the house being an “eligible dwelling”, and the taxpayer being a “qualified individual”.
The Court indicated that the taxpayer satisfied almost all, if not all, of the legislatively required purposes that the renovation assists with: gaining access to a dwelling, or mobility, access, functionality or reduction of harm within a dwelling (only one of these five purposes is required to satisfy this component of the definition). In addition, the Court observed that the renovations were of an “enduring and integral nature to the dwelling”. Both of these conditions (the “purpose” and “enduring and integral” tests) are required to meet the definition of a “qualifying renovation”.
Increase or maintain value of property
Although the entrance was considered substandard by the taxpayer many years prior, it was not replaced earlier nor in contemplation of a sale. Instead, the renovations were undertaken when the taxpayer’s wife’s mobility from age and affliction demanded them. The link between the health purpose and the renovations, and the absence of any other clear indication that the purpose was economic, indicated that the primary purpose was not to increase or maintain the value of the property. The fact that the renovation may also increase or maintain the value of a property was not sufficient to deny the claim.
The Court allowed the full HATC claim.
The Court also stated that “if the drain on the federal treasury is too great because of the existing wording, then Parliament can repeal or amend its textually clear provisions. Until then, the Minister and her agents must have some prominent factual basis for asserting a taxpayer’s primary economic purpose in undertaking these improvements before this exclusion is invoked.”
Note: A “qualifying individual” must either be 65 or older before the end of the taxation year or eligible for the disability tax credit for renovations to their “eligible dwelling” to qualify for the HATC.
ACTION ITEM: Make sure to keep all receipts for renovations that may qualify. Some renovations may also be eligible for a medical tax credit.