The federal tax changes including the Multigenerational Home Renovation Tax Credit and the Residential Property Flipping Rule came into effect on January 1, 2023.
Here are the key takeaways from the new rules:
Multigenerational Home Renovation Tax Credit
If a family decides to add a secondary unit to their home to allow an immediate or extended family member to live with them, this tax credit will cover the eligible construction costs for the same. To be considered for the tax credit, the renovation must be completed in the owner’s primary residence where they live with a senior or disabled person. If the tax credit is approved, it will cover 15 per cent of costs and can be to a maximum of $7,500. Eligible expenses would cover the cost of labour, building materials and also, equipment rentals and permits. Expenses that will not be covered under the tax credit include, furniture, household appliances, construction and equipment tools, routine repair or maintenance costs, and devices and landscaping or security services. All expenses for the renovation have to be shown in receipts.
Residential Property Flipping Rule
The Residential Anti-Flipping Rule implies that if an individual purchases a residential property and decides to sell it within 12 months of their purchase, the profit from that sale would be taxed as business income and would be ineligible for either the 50 per cent capital gains and also the principal residence exemption.
The rule does not apply to the following:
- Additions to the household including, birth of a child, adoption, or taking care of an elderly dependent.
- Marriage or common-law partnership breakdown
- Personal safety issues like domestic violence
- Change in work or employment
- External factors like natural or human-caused disaster