Even though the Home Accessibility Tax Credit (HATC) went into effect in 2016, many taxpayers don’t know about it or remain unsure as to whether they qualify. As an accounting professional, it’s wise to ask your clients questions to tip you off to a potential tax credit, such as whether any mobility-impaired residents live in their home or if it’s had qualifying alterations. If your clients don’t know about the HATC and you don’t ask the right questions, they could end up missing out on this valuable tax credit from the Canada Revenue Agency (CRA).
What Is the Home Accessibility Tax Credit?
The CRA lets taxpayers deduct the HATC as a nonrefundable tax credit from the amount of taxes they owe if they made additions, alterations, or renovations to make their home more accessible to a disabled person or a senior citizen. Ramps are a common example of a modification that makes the home accessible for a relative in a wheelchair. Qualified individuals may deduct up to $10,000 for the HATC credit.
Who Qualifies for the Home Accessibility Tax Credit?
The HATC is available to qualifying and eligible individuals who make specific modifications to their homes. Qualifying individuals are either:
- Eligible for the Disability Tax Credit for the year
- 65 years or older at the end of the year
Eligible individuals include:
- Spouses or common-law partners of qualifying individuals
- Caregivers who claim the qualifying individual as an eligible dependent
Imagine that your client spends $5,000 on a stair lift for his live-in elderly mother so that she can safely navigate his home. If your client can claim his mother as a dependent, he can also claim the cost of the stair lift.
What Counts as a Qualified Dwelling for HATC Purposes?
The CRA considers eligible dwellings to be homes located in Canada that are either:
- Owned, jointly or otherwise, by the qualifying individual and ordinarily inhabited by the qualifying individual
- Owned, jointly or otherwise, by the eligible individual and ordinarily inhabited by the eligible and qualifying individuals
But an exception exists to the second condition: if qualifying individuals own or ordinarily inhabit a different house throughout the year, otherwise-eligible individuals become ineligible for the HATC credit.
What Expenses Qualify for the HATC?
In general, the CRA considers qualifying expenses to be those that permanently alter the residence to make it safer or easier to access by a disabled individual. Examples of qualifying expenses include costs incurred for:
- Grab rails and grab bars
- Installation of walk-in or wheel-in tubs and showers
- Widening doorways for wheelchair access
- Lowering countertops and cabinets for the disabled person to use
Keep in mind that the CRA doesn’t allow deductions for all expenditures that improve safety and accessibility under this credit. Ineligible expenses include:
- Home appliances or home entertainment devices
- Housekeeping costs
- General maintenance costs
- Security monitoring, gardening, outdoor maintenance, or similar services
The CRA also excludes expenditures made simply to increase the value of the property, or for the purpose of gaining or producing income. If you’re unsure as to whether you or your clients have qualified expenses, the agency has a page devoted to frequently asked questions about the HATC that explains covered expenses in greater detail.
Filing for the HATC
To claim the HATC, simply complete and return Schedule 12 – Home Accessibility Tax Credit, and be sure to include the dates and nature of the work along with the name and GST/HST number of the contractor or tradesman who performed it. Advise your clients that they don’t need to attach receipts for the work they claim to their tax return, but should keep them for up to three years in case the CRA audits your client or wants to review their documentation. If your client performed the work themselves, they can claim the cost of supplies but not the labour.
When you’re dealing with your accounting firm’s clients, you can often end up saving them money by asking the right questions. Going above and beyond like this not only keeps your clients happy, it also encourages them to refer your business to their friends and family. With that in mind, be on the lookout for credits and deductions that your clients might miss, and ensure you question them about their expenses so they can save as much money as possible. Accelerate your year-end adjustment process and start saving time on corporate returns with QuickBooks Online Accountant. Sign up for free.