A Smarter Way to Spend Renovation Dollars: Chilliwack and Abbotsford

It can be a sound use of money if you plan to stay. If the home is your principal residence, the gain when you sell is generally exempt from capital gains tax, which is not true of a rental, a cottage, or investments held outside a registered account. Two honest limits: the renovation cost is not a tax deduction, and a renovation does not always add its cost to the sale price. The exemption also depends on meeting the CRA rules. This is not tax advice, so confirm how it applies to you with an accountant.

No. Renovations to a home you live in are not a deduction on your Canadian tax return. Some accessibility work can qualify for the federal Home Accessibility Tax Credit or the BC home renovation tax credit for seniors and persons with disabilities, and a secondary suite for a qualifying relative can qualify for the Multigenerational Home Renovation Tax Credit. A typical kitchen or cosmetic update does not. The credits are described on this page. Confirm your own eligibility with an accountant.

If the home was solely your principal residence for every year you owned it, you generally do not pay tax on the capital gain when you sell. The renovation does not create that result. Meeting the Canada Revenue Agency principal residence rules does. You still report the sale and designate the home. The exemption can be reduced or unavailable if you owned the home for fewer than 365 days, rented part of it, or your family designated a different property for some years. This is not tax advice.

British Columbia has a home renovation tax credit for seniors and persons with disabilities. It is a refundable credit of 10% of qualifying expenses, on up to $10,000 of expenses in a year, so the maximum credit is $1,000. You have to be a BC resident and either 65 or older, a person with a disability, or a family member living with them. The work has to be on your principal residence, and its main purpose cannot be to increase the home’s value. A regular kitchen renovation does not qualify.

People often mean the federal Multigenerational Home Renovation Tax Credit. It is a refundable credit of 14.5% of qualifying expenses, on up to $50,000, so the maximum is $7,250, not $7,500. It applies when a renovation creates a self-contained secondary unit so a senior, or an adult eligible for the disability tax credit, can live with a qualifying relative. You claim it in the year the renovation is completed. It is not a credit for a new kitchen.

Two different rules can apply, and they are not the same tax. Federally, a gain on a Canadian housing unit owned for fewer than 365 consecutive days is treated as business income, and the principal residence exemption is not available, unless a listed life event applies. In BC, the home flipping tax can apply to profit on residential property owned for less than 730 days, for dispositions on or after January 1, 2025. The rate is 20% when the home was owned for fewer than 366 days, and it declines to zero at 730 days. A primary residence deduction of up to $20,000 may apply if you owned the home for at least 365 consecutive days and lived in it as your primary residence. This page is for people who plan to stay.

Capital improvements, meaning work with a lasting benefit that improves the home beyond its original condition, can be added to the adjusted cost base. Routine repairs and maintenance cannot. The Canada Revenue Agency explains the difference. The cost base changes the tax result only when the gain is not fully exempt, for example if the home was rented for some years or only partly designated. Keep every invoice either way. We provide itemized invoices for that file.

It can. If part of the home earns income, the selling price and the cost base may have to be split between the part you lived in and the part that produced income. The whole home can still be treated as a principal residence when the income use is ancillary, there is no structural change, and you do not claim capital cost allowance. A new suite is often a structural change, so the answer depends on the facts. A suite built so a senior or an adult eligible for the disability tax credit can live with you may relate to the multigenerational credit, which is a different question from renting the suite out. Ask your accountant before you decide.