Planning for the future can have many benefits if you know what’s up for grabs and can take advantage of programs and incentives.
The federal Liberal government’s plans for new or enhanced tax credits for surrogacy, first-time home buyers, and renovation expenses for multigenerational households are moving ahead.
The federal Department of Finance recently announced details of draft legislation to implement numerous tax measures, update draft legislation and make technical changes introduced in the 2022 budget in April.
Budget 2022 includes several measures directed at families, home ownership and aging-in-place, including:
Multigenerational home renovation tax credit
The healthy aging of seniors is a concern for many in Canada, and multiple generations of families living under the same roof are rising. According to a recent census, it represents seven per cent of all households in 2021.
Families can claim a refundable credit of up to $7,500 to build a self-contained secondary unit in their home to accommodate seniors over the age of 65 in the year the renovation is completed; or for adults with disabilities who are eligible for the Disability Tax Credit.
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The credit is a refund of up to 15 per cent of a maximum of $50,000 in renovation and construction costs. The renovation must include a private entrance, kitchen, bathroom and sleeping area. The credit would apply for eligible expenses paid for on and after Jan. 1, 2023.
Those planning home renovations and looking for other ways to save may wish to take a closer look at the Canada Greener Homes Initiative. It provides both grants and loans for home evaluations and retrofits. Also, those living in British Columbia, Saskatchewan, Manitoba, Ontario, Quebec or New Brunswick may have access to provincial home renovation tax credits.
First-Time Home Buyers’ Tax Credit (HBTC)
New homeowners will also get some help with increasing closing costs. Currently, new buyers receive a credit of up to $750 when they claim up to $5,000 on a home purchase. Now that it’s doubled to $10,000, the maximum credit will be $1,500. The change applies to the 2022 tax year.
Medical Expense Tax Credit (METC) for surrogacy and other expenses
Out-of-pocket expenses for people struggling to become parents are costly.
While paying a surrogate in Canada is illegal, there are still many other expenses related to surrogacy, including the expenses for which surrogates and donors may be reimbursed. The new legislation that will apply beginning in the 2022 tax year goes one step further. Parents-to-be will be eligible for the medical expense tax credit for surrogacy and donor expenses.
These changes mean that reimbursed expenses will be eligible under the medical expense tax credit.
Refundable tax credit
Refundable tax credits are credits paid to eligible taxpayers. The goods and services tax/harmonized sales tax (GST/HST) credit is an example of a refundable tax credit.
Non-refundable tax credit
When you file taxes, you can claim a basic non-refundable tax credit on income tax, known as the personal amount. In 2021, the personal amount for federal taxes was $13,808. These non-refundable total tax credits reduce taxes payable.
The draft legislation is out for comment until Sept. 30. For details on these changes, the Department of Finance’s explanatory notes describe the proposed amendments and can be found here.
Vaneesa Cline is a financial adviser who has worked in the financial services sector since 2004. She has a Bachelor of Communications Studies from the University of Calgary, holds the Professional Financial Advisor (PFA) and Certified Health Insurance Specialist (CHS) designations, and has her own practice.
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