How to track renovation costs in Canada, and when the receipts matter

For most Canadian homeowners, renovation receipts don't change the tax bill. If a home was your principal residence for every year you owned it, you don't pay tax on the gain when you sell it. You still have to report the sale, on Schedule 3 and Form T2091(IND), but the cost of the new kitchen doesn't change the answer.

There are three exceptions, and each one is decided by the receipts.

1. Accessibility work: the home accessibility tax credit#

The home accessibility tax credit (line 31285) covers renovations that let a qualifying individual — someone aged 65 or over at the end of the year, or eligible for the disability tax credit — live in and move around their home more safely. Up to $20,000 a year of eligible expenses can be claimed.

Eligible expenses include building materials, fixtures, equipment rentals, plans and permits, and professional work such as an electrician, plumber or carpenter. Routine repairs and maintenance, household appliances, and work done mainly to maintain or increase the home's value are not eligible.

2. A secondary unit for family: the multigenerational credit#

The multigenerational home renovation tax credit (line 45355) is a refundable credit for creating a secondary unit so a qualifying relative, such as a senior or an adult eligible for the disability tax credit, can live with you. Up to $50,000 per qualifying renovation of qualifying expenditures can count.

3. Property you rent out, or not a principal residence#

For a rental property, or a home that wasn't your principal residence for every year, renovation receipts affect tax directly:

• Repairs that restore the property are current expenses, deducted in the year you pay them.
• Improvements that give a lasting benefit — the CRA's example is vinyl siding on a wooden house — are capital, claimed over time as capital cost allowance on a rental, and part of the cost when you sell.

The CRA's tests, with its own examples, are in rental property records.

How to track a renovation#

1. One place for everything. Materials, trades, permits, rentals. A renovation produces dozens of receipts in a few weeks.
2. Photograph each receipt the day you get it. Building supply till receipts are thermal paper and fade.
3. Ask trades for proper invoices with their business details and GST/HST number, even for small jobs. The credits above need them.
4. Keep proof of payment beside each invoice.
5. Keep the records for as long as they matter: at least six years after the year you claim a credit, and for a rental, until six years after the year you sell.