Can You Deduct Home Renovations on Canadian Taxes?

What incentives are available for home renovations in Canada?

There may be financial help available, depending on your province and the specific upgrades you make. Some programs offer grants or rebates for energy-efficient improvements, while certain eligible expenses can also be claimed on your tax return. Below is a summary of federal programs, provincial options and tax credits that commonly apply to energy upgrades like switching to a heat pump.

Canada Greener Homes Loan

The Canada Greener Homes Loan offers interest-free financing of up to $40,000 to help homeowners make energy-efficiency improvements. Loans range between $5,000 and $40,000 and are repaid over 10 years. According to the federal program, qualifying retrofits include:

• Home insulation, up to $5,000: Improvements to attic, cathedral ceiling, flat roof, exterior wall, exposed floor, basement and crawl-space insulation.
• Air-sealing, up to $1,000: Work to improve airtightness and reach target air-change rates.
• Windows and doors, up to $5,000: Replacing doors, windows or sliding doors with ENERGY STAR® certified models.
• Thermostat, up to $50: Installing a smart thermostat (must be paired with another eligible retrofit).
• Space and water heating, up to $5,000: Replacing heating or water-heating systems with more energy-efficient equipment, which can include heat pumps.
• Renewable energy, up to $5,000: Installing solar photovoltaic systems to generate electricity from sunlight.
• Resiliency measures, up to $2,625: Adding protections that reduce environmental risk to the home (must be combined with another energy-efficiency retrofit).

To qualify, you must own the home as your primary residence and complete a required pre-retrofit evaluation. Applicants must also meet standard credit requirements and cannot be involved in consumer proposals, orderly payment arrangements, bankruptcies or insolvency proceedings.

You can apply for a Canada Greener Homes Loan through the program’s official portal.

What is the Oil to Heat Pump Affordability Program?

The Oil to Heat Pump Affordability Program offers targeted support to homeowners replacing oil-fired heating with heat pumps. Typical rebates are up to $10,000, with higher maximums—up to $15,000—in Nova Scotia, Newfoundland and Labrador, and Prince Edward Island. Eligibility includes an income threshold: household income must fall below the median after-tax income for your province, adjusted for household size. Check the program details administered by Natural Resources Canada for your province’s specific income threshold and application requirements.

Other provincial programs

Several provinces run their own energy-efficiency and retrofit programs. For example, Quebec offers the Rénoclimat program for residential energy improvements, and Nova Scotia provides a Home Energy Assessment program that helps homeowners identify and complete efficient upgrades. Availability, incentives and eligibility vary by province, so check local program details before planning work.

What home improvements provide tax savings for 2024?

Certain tax credits and rebates can reduce the net cost of renovations, but not all upgrades are eligible for tax relief. Below are the main federal tax credits and rules that commonly apply to renovation work.

Federal Home Renovation Tax Credit

The broad Federal Home Renovation Tax Credit many remember was a one-year measure in 2009 and is no longer available. It does not apply to current projects.

Federal Home Accessibility Tax Credit

The Home Accessibility Tax Credit helps homeowners over 65 or those eligible for the disability tax credit. It supports qualifying renovations that improve accessibility or reduce injury risk in the home. Eligible expenses were limited to $10,000 in earlier years and increased to $20,000 starting with the 2022 tax year. Some of these costs may also qualify under the medical expense tax credit, depending on circumstances.

Multigenerational Home Renovation Tax Credit

Introduced in the 2022 federal budget and effective Jan. 1, 2023, this credit supports up to $50,000 in eligible renovations to create a secondary unit for an immediate or extended family member. It targets projects that add a separate living space within an existing home.

GST/HST New Housing Rebate & provincial new housing rebates

The GST/HST New Housing Rebate and corresponding provincial rebates can apply to substantial renovations where more than 90% of a dwelling’s interior is replaced. These rebates depend on the home’s value and the province in which the property is located, and they typically apply to large-scale rebuilds rather than routine upgrades.

Are maintenance fees tax deductible on a rental property?

For rental properties, repairs and renovations have different tax treatments. Some expenses are current and tax-deductible in the year incurred, while others must be capitalized and depreciated over time. Renovations also affect the adjusted cost base of a property, which influences capital gains when you sell. If you own rental property, consult Canada Revenue Agency guidance to determine whether a specific project is a current expense or a capital improvement.

You have options

In short, Joan, your switch to a ducted heat pump may not qualify for a direct tax credit on your personal return, but several programs can reduce the upfront cost. Consider applying for the Canada Greener Homes Loan and explore the Oil to Heat Pump Affordability Program if you replace an oil furnace. Provincial programs such as Quebec’s Rénoclimat or Nova Scotia’s Home Energy Assessment may offer additional support. Review eligibility rules and required pre- and post-retrofit evaluations before you start the work to maximize available incentives.

Read more about personal income taxes in Canada:

• Can you file multiple years of income taxes together in Canada?
• How to avoid tax on severance pay in Canada
• How to have the most tax-efficient retirement income plan
• Self-employed? Here’s how to file taxes for a side hustle