Homeowner Tax Deductions and Credits: Your Home is a Tax Goldmine

Published: February 24, 2026 | The Money Wise | themoneywise.ca

Whether you just bought your first home, you're planning a renovation, or you've been a homeowner for years, your house represents one of the biggest opportunities for tax savings that many Canadians overlook. From the Home Buyers' Plan to energy-efficient upgrades, home office deductions to the principal residence exemption, there are multiple ways to reduce your tax bill through homeownership.

This week, we're breaking down the key tax deductions and credits available to Canadian homeowners in 2025, including some time-sensitive opportunities you won't want to miss.

First-Time Home Buyers: Get Your Money Back

If you bought your first home in 2025, congratulations! The government wants to help you celebrate, with tax savings.

Home Buyers' Amount (First-Time Home Buyers' Tax Credit)

The CRA offers a non-refundable tax credit of up to $1,500 for first-time home buyers. Here's how it works:

• You can claim up to $10,000 on your tax return

• The tax credit is calculated at 15% (but adjusted to 14.5% for 2025 due to the middle-class tax cut)

• Maximum benefit: $1,450 for 2025

• You can split the credit with a spouse or common-law partner

• Claim it on line 31270 of your tax return

Who qualifies: You (or your spouse) bought your first qualifying home in 2025, and you (or your spouse) did not own another home in 2025 or the previous four years.

First-Time Homeowners Celebrate Significant Savings with Tax Credits: Learn How You Can Benefit with the First-Time Home Buyers' Tax Credit and the Home Buyers’ Plan in Canada!

Home Buyers' Plan (HBP)

If you have an RRSP, the Home Buyers' Plan lets you borrow from your retirement savings to buy or build a qualifying home, tax-free. This isn't technically a deduction, but it's a powerful tool for first-time buyers.

Key details:

• Withdraw up to $60,000 from your RRSP (increased from $35,000 as of April 16, 2024)

• No tax withheld at withdrawal

• You must repay the amount over 15 years

• For withdrawals made between January 1, 2022 and December 31, 2025, you get an extra 3 years before repayment starts (grace period ends in the 5th year after withdrawal instead of the 2nd)

• Both you and your spouse can each withdraw up to $60,000 for the same home

Pro tip: You can contribute to your RRSP, claim the tax deduction, then immediately withdraw the funds under the HBP. This gives you both the tax deduction now and access to the funds for your down payment, just make sure you repay on schedule.

First Home Savings Account (FHSA)

The FHSA is the best of both worlds: you get tax deductions when you contribute (like an RRSP) and tax-free withdrawals when you buy your first home (like a TFSA).

• Contribute up to $8,000 per year

• Lifetime contribution limit of $40,000

• Contributions are tax-deductible

• Withdrawals for a qualifying home purchase are completely tax-free

• Unused contribution room carries forward

• You can use FHSA and HBP together for the same home

Understanding FHSA Contribution Carry Forward

This is NOT Like Your RRSP

Many Canadians assume the FHSA works exactly like an RRSP when it comes to unused contribution room. That’s a costly mistake. The FHSA has strict carry forward rules that can cause you to lose contribution room forever if you’re not careful.

The critical difference:

• RRSP: Unused contribution room carries forward indefinitely. If you don’t contribute for 10 years, all that room is still there waiting for you.

• FHSA: You can only carry forward up to $8,000 (one year’s worth). Any unused room beyond that is lost forever.

How FHSA carry forward actually works:

Each calendar year (January 1 to December 31), you get $8,000 in new contribution room starting in the year you open your first FHSA. If you don’t use the full amount, you can carry forward the unused portion, but only up to a maximum of one year’s worth ($8,000).

Example 1: You don’t lose room (ideal scenario)

• 2025: You open your FHSA and contribute $5,000. Unused room: $3,000

• 2026: Your new limit is $11,000 ($8,000 new + $3,000 carried forward)

• Result: All your contribution room is preserved

Example 2: You LOSE room permanently (common mistake)

• 2024: You open your FHSA but don’t contribute. Unused room: $8,000

• 2025: You contribute $0 again. You get $8,000 new room, but you can only carry forward $8,000 total (not $16,000)

• 2026: Your limit is only $16,000 ($8,000 new + $8,000 carried forward), NOT $24,000

• Result: You’ve permanently lost $8,000 of contribution room from 2024

Example 3: Strategic use to preserve maximum room

• 2024: You open your FHSA but don’t contribute. Unused: $8,000

• 2025: You contribute at least $8,000 (the minimum to avoid losing room)

• 2026: Your full room is $16,000 ($8,000 new + $8,000 carried from 2024)

• Result: By contributing at least $8,000 in 2025, you preserved your 2024 unused room

Critical FHSA rules that differ from RRSPs:

• No 60-day grace period: Unlike RRSPs, FHSA contributions made in January and February do NOT count for the previous tax year. December 31 is a hard deadline.

• Room only starts when you open the account: If you opened your FHSA in 2025, you don’t get retroactive room for 2024 or earlier years. The $8,000 annual room only begins the year you open your first FHSA.

• Maximum carry forward is $8,000: This is the most important rule. No matter how many years you skip contributions, you can never carry forward more than one year’s worth of unused room ($8,000).

• You must file Schedule 15: In the year you open your FHSA, you must complete Schedule 15 on your tax return, even if you made no contributions. This notifies the CRA and starts tracking your participation room.

• Lifetime limit is still $40,000: Even if you lose contribution room due to the carry forward cap, your lifetime maximum remains $40,000 across all contributions.

How to check your FHSA contribution room:

• Log into CRA My Account at canada.ca and select “Savings and pension plans” then “View FHSA details”

• Check your Notice of Assessment after filing your tax return

• Call the CRA Tax Information Phone Service at 1-800-267-6999

⚠️ Warning!

Over-contributions are costly: If you contribute more than your available room, you’ll pay a 1% penalty per month on the excess amount until it’s removed. Unlike RRSPs (which have a $2,000 buffer), the FHSA has no grace amount, even $1 over triggers the penalty.

Bottom line: If you opened an FHSA but haven’t contributed, contribute at least $8,000 before December 31, 2025 to preserve your unused room from previous years. Otherwise, you’ll lose that contribution space forever, and you can’t get it back.

New Homeowners Celebrate Benefits of the First Home Savings Account (FHSA): Unlock tax-deductible contributions up to $8,000 per year and a lifetime limit of $40,000 to make your dream home a reality with essential tax deductions and credits.

Renovations That Pay You Back

Planning a renovation? Some projects qualify for significant tax credits, especially if you're creating space for family members or improving accessibility.

Multigenerational Home Renovation Tax Credit (MHRTC)

If you're creating a secondary suite for a senior (65+) or an adult with a disability, this refundable credit can put serious money back in your pocket.

The numbers:

• Claim up to $50,000 in eligible renovation expenses

• Tax credit rate: 14.5% for 2025 (15% for 2026 onward)

• Maximum credit: $7,250 for 2025 renovations; $7,500 for 2026+

• This is a refundable credit, you get cash back even if you owe no tax

What qualifies:

• The renovation must create a self-contained secondary unit with its own entrance, kitchen, bathroom, and sleeping area

• The unit must be for a qualifying individual (senior 65+ or adult eligible for the Disability Tax Credit)

• The qualifying individual must intend to move in within 12 months of completion

• Claim it in the year the renovation is completed

Eligible expenses:

• Construction materials and labor

• Building permits and inspections

• Architectural and engineering fees

• Rental of equipment or tools

Not eligible: Appliances, furniture, annual maintenance, landscaping.

⚠️ Important: Each qualifying individual can only claim the MHRTC once in their lifetime. Choose your timing carefully!

Home Accessibility Tax Credit (HATC)

If you're making your home safer and more accessible for a senior or someone with a disability, you can claim this non-refundable credit.

The numbers:

• Claim up to $20,000 in eligible expenses per year

• Tax credit rate: 14.5% for 2025 (15% for 2026 onward)

• Maximum credit: $2,900 per year for 2025

• This is a non-refundable credit (reduces taxes owed)

Eligible expenses:

• Wheelchair ramps, walk-in bathtubs, accessible doorways

• Grab bars, handrails, non-slip flooring

• Stair lifts or elevators

• Lowered countertops, widened hallways

• Voice-activated or touch-activated devices

🎯 2025 Double-Dipping Opportunity:

For the 2025 tax year only, you can claim the same expense under both the Home Accessibility Tax Credit AND the Medical Expense Tax Credit if it qualifies for both. This loophole closes starting in 2026. Budget 2025 ended the double claim. If you're planning accessibility renovations, complete and pay for them in 2025 to maximize your tax benefit.

Explore the Multigenerational Home Renovation Tax Credit (MHRTC) that offers up to $50,000 in eligible renovation expenses. With a tax credit rate of 14.5% for 2025 and 15% thereafter, homeowners can receive a maximum credit of $7,250 for 2025 renovations and $7,500 for 2026 onwards, making smart home improvements both beneficial and cost-effective for families.

Home Office Expenses: What You Can (and Can't) Claim

With more Canadians working from home, the CRA tightened the rules. The temporary flat-rate method ($2 per day, up to $500) ended after 2022. For 2025, you must use the detailed method if you're claiming home office expenses.

Who Can Claim

You qualify if all of these are true:

• You worked from home more than 50% of the time for at least four consecutive weeks in 2025

• You were required by your employer to work from home (written or verbal agreement, or formal telework arrangement)

• Your employer did not fully reimburse your expenses

• Your employer completes and signs Form T2200 (Declaration of Conditions of Employment) or T2200S (simplified version)

What You Can Claim

Eligible work-space-in-the-home expenses:

• Electricity, heat, water (proportional to workspace percentage)

• Home internet access fees

• Rent (if you rent your home)

• Maintenance and minor repairs (workspace portion)

• Office supplies (pens, paper, printer ink)

• Phone expenses if required by your employer

You cannot claim:

• Mortgage principal or interest

• Property taxes

• Home insurance

• Capital expenses (furniture, computer equipment, etc.)

How to Calculate Your Claim

Calculate the percentage of your home used for work:

1. Measure your workspace (e.g., 100 square feet)

2. Measure your total home area (e.g., 1,500 square feet)

3. Calculate: 100 ÷ 1,500 = 6.67%

4. Apply this percentage to eligible expenses

Example:

• Annual electricity: $1,200 × 6.67% = $80

• Annual heat: $1,800 × 6.67% = $120

• Annual internet: $960 × 6.67% = $64

• Office supplies: $150

• Total deduction: $414

⚠️ Important limitations: You can only claim home office expenses up to your employment income. You cannot use these expenses to create or increase a loss. If you can't claim all expenses in 2025, you can carry them forward to future years.

Use Form T777S or T777 to calculate your claim and enter the result on line 22900 of your tax return.

Understanding Home Office Expenses: Eligibility and Tax Deduction Tips for 2025. Learn who can claim deductions and the necessary forms required to benefit from homeowner tax deductions and credits.

Selling Your Home: The Principal Residence Exemption

The principal residence exemption is one of the most valuable tax benefits in Canada. When you sell your primary home, you typically pay zero tax on the capital gain, but you must report the sale and designate the property to claim the exemption.

How It Works

If a home was your principal residence for every year you owned it, the full capital gain is exempt from tax.

Example:

• You bought your home in 2010 for $350,000

• You sold it in 2025 for $850,000

• Capital gain: $500,000

• Tax owed with principal residence exemption: $0

Without this exemption, you'd owe tax on $250,000 (50% of the gain), which could be $75,000+ in taxes depending on your income.

Critical Reporting Requirements

Since 2016, you must report all principal residence sales, even if no tax is owed. The CRA will deny the exemption if you don't report properly.

What to file:

• Schedule 3 (Capital Gains or Losses)

• Form T2091(IND) (Designation of a Property as a Principal Residence by an Individual)

• Include the date of acquisition, proceeds of sale, and property description

Forgot to report? You can file a late designation, but there's a penalty: the lesser of $8,000 or $100 per month from the original filing deadline.

The "Plus-1" Rule

The formula for the exemption includes a "plus 1" that benefits you when you sell one home and buy another in the same year. This allows you to designate both properties as your principal residence for that overlapping year.

Exemption Formula:

(1 + number of years designated) ÷ total years owned

Multiple Properties: Plan Carefully

If you own a cottage, rental property, or second home, only one property per family unit can be designated as the principal residence for any given year. Strategic planning can maximize your tax savings:

• Designate the property with the highest gain per year

• Consider which property you'll sell first

• Consult a tax professional for complex situations

House Flipping Rules

Starting January 1, 2023, if you sell a residential property you've owned for less than 365 consecutive days, any profit is treated as fully taxable business income (not a capital gain), and the principal residence exemption doesn't apply.

Exceptions exist for: marriage, separation, death, serious illness or disability, work relocation (40+ km closer to work), insolvency, or involuntary property damage/destruction. You'll need documentation to prove the exception.

Your Homeowner Tax Action Plan

Here's what to do before tax season ends:

1. Gather receipts for 2025: If you're claiming home office expenses, MHRTC, or HATC, organize all invoices, receipts, and proof of payment now. For home office, you'll also need Form T2200 from your employer.

2. Calculate workspace percentage: If you worked from home, measure your workspace and calculate the percentage of your home used for work. Use the CRA's calculator at canada.ca/home-office-expenses.

3. Report home sales: If you sold your principal residence in 2025, complete Schedule 3 and Form T2091(IND), even if you owe no tax. Missing this step means losing the exemption.

4. Claim first-time buyer credits: If you bought your first home in 2025, claim the Home Buyers' Amount (line 31270) and check if you used the HBP or FHSA.

5. Plan 2025 accessibility renovations: If you're thinking about accessibility improvements, complete them before December 31, 2025 to claim both HATC and medical expenses for the same work (this double benefit ends in 2026).

6. Check MHRTC eligibility: If you completed a multigenerational renovation in 2025, file Schedule 12 to claim up to $7,250 back.

Let's Make Your Home Work Harder for You

Your home isn't just where you live, it's a powerful tool for building wealth and reducing taxes. From the moment you buy your first home to the day you sell, Canadian tax law offers homeowners strategic opportunities to save thousands of dollars.

Whether you're planning renovations, working from home, or thinking about selling, understanding these deductions and credits means more money staying in your pocket.

Need help navigating homeowner tax credits or planning your tax strategy? That's exactly what The Money Wise is here for.

Let's get money-wise together.

Empower your financial journey with The Money Wise. Dive into expert strategies and personalized advice tailored to make your money work smarter. Connect with us today at @themoneywise.ca and hello@themoneywise.ca, or visit www.themoneywise.ca. Join now and pave the way to financial success!

Resources & Next Week

Official CRA Resources:

• Home Buyers' Plan: canada.ca/home-buyers-plan

• First Home Savings Account: canada.ca/fhsa

• Home office expenses: canada.ca/home-office-expenses

• Multigenerational Home Renovation Tax Credit: canada.ca/mhrtc

• Home Accessibility Tax Credit: canada.ca/home-accessibility

• Principal Residence and Real Estate: canada.ca/principal-residence

Next week: We're diving into medical expenses, charitable donations, and other deductions you might be missing. From prescription costs to fitness memberships, we'll show you how to maximize every credit available to you. Stay tuned!

The Money Wise | Tax Season Blog Series 2026

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