Section 2 – Individuals and Families
A refundable tax credit is available for expenses paid by an individual before December 31, 2019 for eco-friendly residential renovations done to a dwelling that is the individual’s principal place of residence or winterized cottage whose initial construction was completed before 2016. The tax credit is equal to 20% of the eligible expenditures that exceed $2,500 to a maximum credit of $10,000 per eligible dwelling. To be entitled to the tax credit, the work done must satisfy certain recognized energy or environmental standards and be carried out by a contractor pursuant to an agreement entered into after March 17, 2016 and before April 1, 2019.
A refundable tax credit is offered for expenses paid by an individual no later than December 31, 2022 for work to upgrade residential waste water treatement systems. The credit is equal to 20% of the portion of eligible expenditures that exceed $2,500 but are not more than $30,000 (for a total maximum tax credit of $5,500) per eligible dwelling. Generally, work recognized for the purposes of this credit relates to the construction, renovation, modification or rebuilding of a system for the discharge, collection and disposal of waste water, toilet effluents or grey water. Eligible work must be carried out by a contractor under the terms of an agreement entered into after March 31, 2017 but before April 1, 2022.
A refundable tax credit is offered for the restoration of secondary residences (cottages) damaged by the severe flooding that hit a number of Quebec municipalities from April 5 to May 16, 2017. The credit comprises the following two components:
- Under the first component of the tax credit, taxpayers are entitled to an amount equal to 30% of expenditures exceeding $500, paid during 2017 to have recognized post-disaster clean-up work (emergency work) or recognized preservation work (temporary work) carried out. The maximum credit which may be claimed for this component is $3,000.
- Under the second component of the credit, taxpayers are entitled to an amount equal to 30% of repair expenditures paid before January 1, 2019 to have recognized work carried out to repair damage attributed by an expert in damage assessment to flooding that occurred in a territory covered by the Program Relating to Flooding from April 5 to May 16, 2017.19 The maximum credit which may be claimed for this component is $15,000.
This credit must be claimed over 2017 and 2018, depending on when the expenditures are paid.
Provided certain conditions are satisfied, the Revenue Minister may pay the credit in advance to an individual who applies.
19 For more details about the program, including the list of eligible municipalities, go to the Ministère de la Sécurité publique site: http://www.securitepublique.gouv.qc.ca/en/civil-protection/financial-disaster-victims/special-financial-assistance-program-flooding-2017.html
An individual who acquires his/her first home to use as a principal residence is entitled to a non-refundable tax credit of 15% for federal and Quebec20 purposes of $5,000 (maximum credit of $750). An individual will be considered to have purchased his/her first home if neither he/she nor his/her spouse owned and occupied another dwelling during the year of the purchase or the four preceding calendar years. The credit may also be claimed in respect of certain dwellings acquired by an individual who is entitled to the disability credit or for his/her benefit.
20 Since 2018.
Various tax credits and home assistance programs are available for seniors and persons with disabilities (see Section IV).
The HBP allows a taxpayer and his/her spouse to borrow, without any tax consequences, up to $25,000 from each of their RRSPs to purchase a home in which they are going to live. A number of conditions must be met, including:
- The taxpayer and his/her spouse must not have owned a home they used as a principal residence during the year of the withdrawal21 or the four preceding calendar years.
Example: A taxpayer wants to make an HBP withdrawal on February 1, 2019. He/she must not have owned a home from January 1, 2015 to January 1, 2019.
- When the amount is withdrawn, the taxpayer must have entered into a written agreement to buy or build a home that he/she intends to use as a principal residence.
- The taxpayer must make annual repayments of the amount borrowed over a period of not more than 15 years. Any unpaid amount for a particular year, will be included in his/her income for the year. Each year, taxpayers who participate in the HBP receive a statement from the CRA showing repayments to date as well as the amount that has to be repaid the following year.
Contributions to the taxpayer’s RRSP or the RRSP of his/her spouse during the 89-day period preceding the withdrawal may not be deductible.
A taxpayer can make use of the HBP in a given year for a second time if, in the preceding year, he/she repaid the total HBP withdrawal previously made and he/she meets all the conditions required to be eligible once again.
Special rules are provided for disabled individuals and situations where the taxpayer who used the HBP turns 72, dies or leaves Canada.
21 Except for the period ending 31 days before the date of the withdrawal.
The capital gain on a principal residence is not taxable provided the taxpayer designates it as his/her principal residence in his/her income tax return. Only one property may be designated as a principal residence for a year per family. A number of family residences may be eligible for the exemption even if they are only used on weekends, e.g. cottages or secondary residences in Canada or elsewhere.
Special rules apply when the taxpayer starts to rent all or part of his/her residence.
This document has been updated on August 31st, 2018 and reflects the state of the Law, including draft amendments, at that date.