Renovation has tax implications that many Ontario homeowners miss — both opportunities (credits, deductions) and obligations (HST, capital gains considerations). This isn’t tax advice, but it’s an orientation to what you need to ask your accountant.
HST on Renovation Services
Renovation services are subject to 13% HST in Ontario. This should be included in all contractor quotes — if a quote is presented excluding HST, add 13% to your budget.
Exception: Some homeowners ask contractors to work “under the table” without HST. This is tax evasion, not tax avoidance. The contractor risks serious CRA penalties; the homeowner loses any warranty, permit, and insurance protections.
Home Accessibility Tax Credit (Federal)
A 15% non-refundable federal tax credit on up to $20,000 per year in eligible renovation expenses for persons with disabilities or seniors over 65. Eligible expenses include: grab bars, wheelchair ramps, walk-in tubs, widened doorways, accessible bathrooms.
2026 maximum credit: $3,000 (15% × $20,000).
Multigenerational Home Renovation Tax Credit (Federal)
Introduced in 2023: 15% refundable tax credit on up to $50,000 in expenses for eligible renovations creating a secondary unit for a senior or person with a disability.
2026 maximum credit: $7,500 (15% × $50,000).
Check Canada.ca for current eligibility requirements.
First Home Savings Account (FHSA) and Renovations
The FHSA is for home purchase, not renovation. However, first-time buyers who use the FHSA to purchase a home that needs renovation should be aware that renovations immediately after purchase don’t qualify for the FHSA.
Capital Gains and the Principal Residence Exemption
For most Toronto homeowners, renovation costs don’t directly generate tax savings — but they do increase the adjusted cost base of your property. For any home that isn’t your principal residence (rental property, vacation home), renovation costs reduce your capital gain on sale.
Keep all renovation receipts, contracts, and invoices permanently for capital gains calculation purposes.
HST New Housing Rebate
If renovating a substantially renovated home (essentially gutting it and rebuilding interior), you may qualify for the HST New Housing Rebate. “Substantial renovation” is defined by the CRA as removing and replacing at least 90% of the interior — a high bar, but relevant for complete gut-renovations.
Get proper tax advice from a CPA for any significant renovation project.
For peer experiences on renovation tax questions, home.renovation.reviews has discussion threads covering homeowner tax experiences. LF Builders provides organized invoicing for tax documentation.