The credit lets home owners claim 15% of the renovation cost up to a maximum of $50,000, potentially allowing them to subtract as much as $7,500 from their income tax.
However, the mother-in-law suite must be self-contained.
“It has to have its own entrance, its own kitchen, bathroom, sleeping area,” noted Cestnick. “You can’t just sort of carve up one room of the house and then renovate it and claim the tax credit.”
House flipping rules
As of Jan. 1, profits from the sale of residential properties owned for less than a year are taxed as business income, rather than treated as a tax-free capital gain if it’s your primary residence.
“The government’s been concerned about people who are buying, fixing up and flipping properties. For many years people have been kind of abusing the rules and calling these properties their principal residences and really not paying any tax,” Cestnick said.
However, there are some key exceptions.
“The government doesn’t want a rule like this to require people to stay in bad marriages or to stay with somebody if there’s a threat of domestic violence,” Ewing said. A death, illness or disability might also allow for a sale soon after purchase that would be exempt from taxation.
New trust filing requirements
The reporting rules around trusts have expanded to include taxpayers who didn’t have to note them on their returns before.
