Are construction works tax deductible?
- coraliefortin076
- Jul 31
- 7 min read
The question of whether construction or renovation work is tax deductible is often on the minds of homeowners. With Plan Maison Québec, you may be considering building, expanding, or modernizing your house, cottage, or garage, while also seeking to optimize your tax situation.
This article explores the different Canadian and Quebec tax systems, the fundamental distinctions between eligible and ineligible expenses, and the precautions to take to take advantage of credits or exemptions. The goal is to provide you with a clear overview to guide your development projects with tax intelligence.
Federal framework: the tax credit for multigenerational housing
At the federal level, the Canada Revenue Agency (CRA) offers the Multigenerational Home Renovation Tax Credit (MHRTC). This refundable credit allows you to claim 15% of eligible expenses up to $50,000, for a maximum credit of $7,500.
This program is for individuals who are converting an independent living unit, often to accommodate a person over 65 or with a disability. Eligible expenses include goods and services directly related to the renovation, construction plans, permits, and equipment rentals (but not labor or personal tools).
It is essential to ensure that the expenses are reasonable, incurred after December 31, 2022, and related to an eligible property. Amounts over $50,000 are only eligible for a maximum payment of $7,500. If several separate renovations are carried out in the same year, they may each be eligible within the limits provided.
So, if you are a Plan Maison Québec client and want to add a multigenerational home to your residence, this program can provide significant financial assistance.
GST/HST (and GST/QST in Quebec) refund for major renovations
Few homeowners are aware that it's possible to recover a portion of the tax paid during a construction or major renovation project. However, this is one of the most attractive tax levers for reducing the overall cost of a project, provided you understand the strict criteria.
At the federal level, when you undertake a substantial renovation, the Canada Revenue Agency allows you to claim a partial GST/HST rebate. A major renovation is defined as a project that affects at least 90% of the existing living space of your home. In other words, it's not simply a kitchen or bathroom renovation, but rather a major project, often comparable to a reconstruction.
This rebate can also apply to new construction, provided the residence is intended for your personal use or that of a member of your immediate family. It covers a portion of the federal tax (GST or HST depending on your province), on a sliding scale linked to the value of the house after renovations. For example, for houses costing less than $350,000, the rebate can reach 36% of the GST paid, with a ceiling of around $6,300. For higher amounts, the rebate decreases and disappears completely above $450,000.
In Quebec, this measure is accompanied by an equivalent provincial rebate on the QST, administered by Revenu Québec. The conditions are similar: the house must be used as a principal residence, the work must constitute a major renovation or new construction, and the application must be made within two years of occupying the house.
This is where professional support from Plan Maison Québec comes in. Our experts know how to structure a project so it meets the eligibility thresholds for these reimbursements. In addition to designing your renovation or construction plans, we help you prepare the technical and financial documentation needed to support your application to the tax authorities.
This process often represents several thousand dollars in reimbursement. Careful and compliant planning from the outset is therefore essential to fully benefit from it.
Home Accessibility Credit
The Home Accessibility Tax Credit is a non-refundable federal program designed to help seniors and people with disabilities remain in their homes by supporting renovations that make a home safer, more accessible, and better suited to their needs.
This credit is available to two types of taxpayers: individuals aged 65 and over, or individuals of any age with a recognized physical or mental disability. An eligible relative who cares for such a person can also claim the credit.
The maximum amount of eligible expenses is set at $20,000 per tax year, which can represent a maximum credit of $3,000 (15% of expenses). The work must be designed to allow the individual to access their home, move around more easily, or perform daily tasks independently and safely.
Eligible work is varied. This may include installing ramps, bathroom grab bars, curb-free showers, stair lifts, or modifying door thresholds, narrow hallways, or stairways. Costs related to professional labor, materials, technical plans, and municipal permits are all eligible, as long as they are directly related to the accessibility goal.
By collaborating with Plan Maison Québec, you ensure that accessibility plans are designed in compliance with architectural standards and tax requirements. Our designers know how to adapt spaces to improve mobility while preserving the aesthetics and functionality of the home. We can also help you identify the supporting documents required for your tax returns, thus avoiding errors or omissions that could jeopardize your eligibility for the credit.
This program is perfectly aligned with a growing trend in Quebec and Canada: enabling people to age in place, in living environments designed for them, without compromising their dignity or safety. Plan Maison Québec is proud to contribute to this essential social objective by making architecture accessible to all.
Provincial taxation: perspectives in Quebec
In Quebec, the taxation applicable to renovation or construction work has significant specificities, distinct from the federal system. Understanding provincial programs can help you significantly optimize your residential investments, especially if you are planning major renovations with Plan Maison Québec.
One of the best-known programs is the partial QST rebate for new or substantially renovated homes. This is the provincial equivalent of the GST rebate mentioned earlier. To qualify, your residence must be occupied as your principal residence, and the cost of the construction or renovations must reach a certain level. Again, the renovation must be substantial—changing more than 90% of the living space—to be eligible. If the conditions are met, you can receive up to $9,975 in QST rebates.
Revenu Québec also recognizes other situations where the work may have tax impacts. For example, when it comes to environmental upgrades—such as installing a new wastewater treatment system or energy-efficient systems—certain municipal or provincial credits may be available at the same time, although they don't always take the form of tax credits on the annual return.
Finally, in certain specific cases, such as the quick resale or short-term rental of a renovated property, the expenses incurred may have more complex tax consequences. They may be considered business expenses or rental income, rather than personal expenses. This completely changes the way you must report them. That's why it's strongly recommended that you consult a tax advisor before beginning work, especially if you're using Plan Maison Québec for a project involving resale, seasonal rental, or mixed-use property.
With proper planning and advice from plan drawing professionals like Plan Maison Québec, you can avoid common mistakes, comply with provincial requirements, and potentially save thousands of dollars in taxes.
Essential distinction between current expenditure and capital expenditure
Canadian and Quebec tax laws clearly distinguish between two types of housing-related expenses: current expenses and capital expenses. Current expenses, such as repairing a leak or painting, are generally not deductible. However, capital expenses that improve the value, lifespan, or functionality of the home (such as an extension or major renovation) can sometimes be added to the cost of the property to reduce a capital gain upon resale.
For Plan Maison Québec clients, this distinction is important. Our detailed renovation or expansion plans allow you to clearly document the nature of the work and support a claim for a tax deduction or adjustment. By collaborating with your tax advisor from the design stage, you avoid unpleasant surprises upon resale or in the event of an audit.
Five often underutilized credits or deductions
Many homeowners miss out on tax benefits related to their homes. Here are five credits and deductions to keep in mind, especially if you're working with Plan Maison Québec:
1 ) Energy-efficient home renovation credit
Several federal and provincial programs encourage work to improve energy efficiency. Insulation, high-performance windows, and energy-efficient heating systems can generate tax credits, reducing your bill.
Want to make your home more sustainable? To learn more, click on one of the following articles:
2 ) Mortgage interest deduction for rental purposes
If you rent out part of your home or a cottage, the mortgage interest on that portion is sometimes deductible, which can significantly reduce your tax burden.
3 ) Construction Materials Tax Credit
Specific programs allow you to claim a credit on certain taxes paid when purchasing materials for major renovations.
4 ) Deduction for professional expenses related to renovation
If you hire an architect or designer (like those at Plan Maison Québec), professional fees can sometimes be deducted as capital expenses, depending on the project.
Want to renovate while staying within your budget? To learn more, click on one of the following articles:
5 ) Tax credit for disabled people or caregivers
Beyond the accessibility credit, specific credits may apply to caregivers and people with disabilities for home-related work or services.
There are programs available to make your home more accessible while staying within your budget. To learn more, click on the following article:
Conclusion : construction work that is tax deductible
Understanding the tax implications of construction or renovation work is complex, but essential to optimizing your real estate investments. Whether you're planning a major renovation, adding a multigenerational unit, or making accessibility adjustments, there are beneficial tax measures available—as long as you understand and apply them properly.
Plan Maison Québec supports you every step of the way: from designing the plans for your house, cottage, or garage to preparing the documents for your tax applications. Our technical and regulatory expertise allows you to maximize your benefits while complying with all applicable standards.
Don't miss out on tax savings opportunities.
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