Will the Multigenerational Home Renovation Tax Credit Affect Your Principal Residence Exemption?
Updated: Oct 4
Reviewed October 4, 2026.
Claiming the Multigenerational Home Renovation Tax Credit (MHRTC) does not, by itself, cancel your principal residence exemption. The important questions are who qualifies for the credit, how the property is occupied, and whether its use changes.
Who qualifies for the renovation credit?
The credit supports a qualifying renovation that creates a self-contained secondary unit for a qualifying individual to live with a qualifying relation. A qualifying individual is generally someone aged 65 or older at the end of the year, or an adult aged 18 to 64 who meets the disability tax credit eligibility requirements. Creating a suite for an adult child does not qualify simply because the child is family.
The secondary unit needs its own entrance, kitchen, bathroom and sleeping area, and must meet applicable local requirements. Ownership, claimant residency, eligible family relationships and occupancy conditions also apply. The dwelling generally must be ordinarily inhabited by the qualifying individual and a qualifying relation, or reasonably expected to be so within 12 months after the renovation period ends.
The maximum credit depends on the tax year
Up to $50,000 of qualifying expenditures may be claimed for one qualifying renovation, shared across eligible claimants. The maximum was $7,500 at the 15% rate for 2023 and 2024, and is $7,250 at the 14.5% rate for 2025. Under the current statutory formula and the 14% rate for 2026, the maximum is $7,000 for 2026. Use the rules for the year the renovation period ends; the same qualifying individual cannot generate a second qualifying renovation claim later.
Family occupancy does not guarantee a full exemption
The MHRTC and principal residence exemption have different tests. For principal residence purposes, ownership, ordinary habitation, the family unit's designation choices and the years involved matter. The MHRTC's list of qualifying relatives is broader than the principal residence occupancy test. A family relationship alone does not establish that every part of the property qualifies for every year.
What if you later rent the suite?
Converting part of a home to an income-producing use may trigger a deemed disposition and reacquisition of that part at fair market value. The gain up to the conversion may qualify for the principal residence exemption, depending on the facts. Later gains and the allocation on sale need a separate review.
CRA has an administrative practice for minor income-producing use where all three conditions are met: the income use is ancillary to the home's main residential use, no structural change is made, and no capital cost allowance is claimed. A structural conversion to a self-contained rental unit can fall outside that practice. Elections under subsections 45(2) or 45(3) may be available in appropriate circumstances; they are not automatic.
Before renovating or changing the use
Confirm the eligible individual, family relationship, ownership and occupancy arrangements. Keep permits, plans, contracts, paid invoices and records of who lived in each part of the property. Before renting the unit, obtain advice on the change-of-use date, valuation, capital cost allowance and any election. Report a principal residence sale even where the gain is fully exempt.
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Discuss your situation with Xponents
Contact Xponents to discuss the issue and the scope of a tax-planning review. Advice and implementation depend on your facts and the agreed engagement.
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