Even though the Home Accessibility Tax Credit went into effect in 2016, many taxpayers do not know about it or are unsure whether they qualify. As the accounting professional, it’s wise to ask general questions to tip you off to a potential tax credit, such as whether there are any mobility-impaired residents or if the home has had alterations. If your clients are not aware of the credit and you don’t ask the right questions, they could end up missing out.
The Credit and Who Qualifies
The Home Accessibility Tax Credit (HATC) is a nonrefundable tax credit that’s deducted from the amount of taxes owed by the taxpayer for the cost of additions, alterations, or renovations used to make the home more accessible to a disabled person or a senior citizen. A common example of such a modification is a ramp to make the home accessible for a relative in a wheelchair. Qualified individuals may deduct up to $10,000 for this credit.
The taxpayer qualifies for the credit if he:
- Is 65 or older
- Holds a valid Disabled Tax Credit certificate, or
- Is supporting someone who qualifies directly.
The taxpayer may also qualify for this credit if claiming the amount for an eligible dependant, caregiver amount, or amount for infirm dependants age 18 or older for the qualifying person. For example, suppose the taxpayer spends $5,000 on a stair lift for his live-in elderly mom so she can get up and down the stairs safely. If the taxpayer can claim the caregiver credit for her, he can also claim the cost of the stair lift.
In general, a qualifying expense is any permanent alteration that makes the residence safer for the disabled individual or makes it easier to access. Examples of qualifying expenses include costs incurred for:
- Grab rails and grab bars
- Installation of walk-in or wheel-in tubs and showers
- Costs associated with widening doorways for wheelchair access
- Costs associated with lowering countertops and cabinets for the disabled person to use
Not all expenditures to improve safety and accessibility are allowed under this credit. Examples of ineligible expenses include:
- Costs for home appliances or home entertainment devices
- Housekeeping costs
- General maintenance costs
- Costs associated with security monitoring, gardening, outdoor maintenance, or similar services
- Expenditures made simply to increase the value of the property, or for the purpose of gaining or producing income
The Canada Revenue Agency has a page devoted to frequently asked questions about the Home Accessibility Tax Credit that explains which expenses are covered in greater detail.
Filing for the Credit
To claim the HATC, simply complete and return Schedule 12 – Home Accessibility Tax Credit, being sure to include the dates and nature of the work as well as the name and GST/HST number of the contractor or tradesman who performed it. Advise your clients they don’t need to attach receipts for the work being claimed to their tax return but should keep them for up to three years in case the CRA wants to review them. If the client performed the work himself, only the cost of supplies qualifies; the client can’t claim a deduction for labour.
Imagine the surprise of the taxpayer getting an unexpected HATC credit because you asked the right questions. Not only is that client going to call you for future accounting needs, but you stand to gain some referral business once friends and relatives hear how you saved him money. There are lots of credits that taxpayers may be missing. It’s your job to ask questions and make sure they take every credit allowed.