CRA loses battle with 76-year-old woman over tax credit for 'rickety' deck repair
Dec. 31 is the deadline to make a variety of payments if you hope to get some tax relief on your 2019 return. Tax deductible interest, charitable donations and a variety of other expenses must all be paid by the end of year to claim a deduction or credit for 2019. One such expense that must be paid by year-end is the relatively new Home Accessibility Tax Credit (HATC).
First available for the 2016 tax year, the non-refundable HATC assists seniors, as well as individuals eligible for the disability tax credit, with certain home renovations. The tax credit is equal to 15 per cent of up to $10,000 of expenses, per year, towards renovations that permit qualifying individuals to gain access to, or to be more mobile or functional, within their home, or reduce their risk of harm within their home or from entering their home. The HATC applies to payments made by Dec. 31 for work performed or goods acquired in 2019.
Last week, the Tax Court decided its first-ever case involving a taxpayer’s challenged HATC claim. The decision, and the facts and circumstances surrounding the claim, including the Canada Revenue Agency’s objections, shed some light on how the rules are being interpreted by the CRA and now, the Tax Court.
The case involved an Alberta taxpayer who claimed the full $10,000 HATC for the 2016 tax year. He and his wife have owned their home since 1989. The house has a backyard and garden and, until 2016, the entry from the house to the yard was via two wooden steps without any railing or landing area. As the judge noted, “one would call the pre-existing steps rickety.”
The taxpayer’s wife, who is 76 years old, suffers from reduced mobility owing to her affliction with profound atrial fibrillation and Type II diabetes. The renovations undertaken to ease his wife’s accessibility were the removal of the pre-existing steps and the construction of a deck made of footings, joists, decking, railings and a five-foot wide stairway, all surrounded with sturdy aluminum railings. The cost incurred by the taxpayer for the construction exceeded $11,000 but the HATC credit was capped at the legislative maximum of $10,000.
The CRA rejected the taxpayer’s HATC claim, its agents confirming the reassessment by repeating “their generic opinion that decks do not meet the definitional requirements of a qualified renovation for the HATC.” In Tax Court, however, the CRA was more specific, and argued that the improvements were outside the scope of a qualified renovation because the renovation was “not of an enduring and integral character to the house.” Furthermore, it stated that the taxpayer’s wife’s “accessibility, mobility and/or functionality to, in or around the house was not sufficiently assisted through the renovations,” and the renovations were “disproportionately larger, grander and more intricate than those minimally required to accomplish increased access, mobility, functionality or to reduce the risk of harm within or in accessing the house.”
Under the Income Tax Act, for the purposes of claiming the HATC, a “qualifying renovation means a renovation or alteration of an eligible dwelling … that is of an enduring nature and integral to the eligible dwelling and is undertaken to enable the … individual to gain access to, or to be mobile or functional within, the eligible dwelling, or reduce the risk of harm to the qualifying individual within the eligible dwelling or in gaining access to the dwelling.” It does not, however, include “an outlay or expense … made or incurred primarily for the purpose of increasing or maintaining the value of the eligible dwelling.”
The judge reviewed a variety of pre- and post-construction photographs which “showed a very tenuous point of entry and unstable access point for someone with such compromised mobility.” He concluded that the various medical opinions concerning the taxpayer’s wife’s mobility, combined with the deck’s specifications, “thoroughly accomplished the increased and lengthened utility and mobility (of the taxpayer’s wife) in and around the house.” The judge also concluded that the renovations were, indeed, of “an enduring and integral nature to the dwelling,” noting that the elaborate construction into the headers of the concrete foundation of the house, the use of anchors into the pre-existing foundation and the nine cement footings below the deck “ensure its endurance, possibly beyond that of the main dwelling.”
The judge also dismissed the CRA’s argument that the renovation was done primarily to enhance or maintain the home’s value, calling it “vague at best.” He noted that the pre-existing steps had been in place for 18 years and their replacement was necessitated not because of their “de minimus nature, rickety state or pressing or (immediate) need to enhance the value of the property” (there being no imminent plans to sell the house) but rather the renovation was done on account of the taxpayer’s wife’s worsening mobility, since her use of, and access to, the house from kitchen to garden were “increasingly compromised and limited.”
The judge found in favour of the taxpayer and allowed the HATC. As he wrote, the purpose of the HATC “is to make accessible renovations more affordable to seniors living in the community, in turn, within the safety and comfort of their houses.”
The judge continued: “The health cost savings to society, dignity of the elderly and lessening of isolation in institutions, where not a choice of the senior or immobile person, comprise the proximate goals of extending this fiscal benefit to seniors and the mobility compromised.”