Tax Guide for Renovation and Home Improvement Contractors in Quebec: GST/QST Rules, Income Reporting, and Deductible Project Costs — CPA Firm Near You, Montreal

Introduction

Renovation and home improvement contractors in Quebec — including kitchen remodelers, flooring specialists, painters, drywall installers, tilers, and general renovation companies — face strict tax requirements. Because renovation projects often involve mixed labour and material costs, subcontractors, GST/QST invoicing, and large deductible expenses, this sector is frequently targeted by CRA and Revenu Québec. This guide explains how renovation contractors must report income, apply GST/QST properly, claim deductions, and how a CPA firm near you in Montreal can help ensure full compliance and minimize tax exposure.

Legal and Regulatory Framework

Under the Income Tax Act and the Taxation Act of Quebec, renovation contractors must report all income from residential and commercial renovation projects, project management, labour-only contracts, and subcontracting. Renovation services are taxable, meaning GST and QST registration is required once the small-supplier threshold is exceeded. Invoices must include tax numbers, client information, project details, materials used, labour breakdown, and GST/QST amounts. Deductible expenses include materials, tools, subcontractor payments, equipment rentals, mileage, safety gear, advertising, home office expenses, and insurance. CRA and Revenu Québec require receipts, contracts, and job-cost documentation for all expenses.

Key Court Decisions

Courts have ruled that renovation contractors must produce supplier invoices, project details, and subcontractor records to validate deductions. Judges have denied claims where taxpayers failed to keep receipts, mixed personal renovation expenses with business expenses, or used undocumented labour. Cases also emphasize that GST/QST must be charged on both labour and materials, and errors can trigger large assessments. Courts further confirmed that income must be reported in the year services are performed, even if payments are staggered.

Why CRA and Revenu Québec Target Renovation Contractors

Renovation contractors are frequently audited due to:
• Cash-based transactions
• Missing receipts for materials
• Undocumented subcontractors
• Improper GST/QST invoicing
• Large tool and vehicle deductions
• Personal renovation projects written off as business expenses
• Mismatched revenue and material purchases

Auditors cross-check supplier invoices, bank deposits, RBQ registration, and project records to identify inconsistencies.

Mackisen Strategy

At Mackisen CPA Montreal, we help renovation contractors build a complete job-costing and tax-compliance system. We establish proper GST/QST invoicing, reconcile materials with project revenues, and ensure subcontractor payments are properly documented. We optimize deductions for tools, equipment rentals, advertising, software, mileage, insurance, and home office costs. Our team prepares year-end filings, manages depreciation schedules, and ensures compliance with RBQ and tax authorities. If audited, we defend your expense claims, rebuild missing job-costing records, and negotiate reduced reassessments.

Real Client Experience

A Montreal renovation contractor was audited after claiming large material expenses without receipts. CRA attempted to deny nearly all deductions. We reconstructed supplier invoices using bank statements, job logs, and delivery slips, recovering a substantial portion of the deductions. In another case, a contractor failed to charge GST/QST correctly on renovation services; we corrected filings, recalculated tax amounts, and built a compliant invoicing model.

Common Questions

Are renovation services taxable?

Yes. Renovation labour and materials are subject to GST and QST once revenue exceeds the threshold.

What expenses can renovation contractors deduct?

Materials, tools, subcontractor payments, equipment rentals, software, vehicle expenses, insurance, and home office costs.

How important is job-costing?

Very. Job-costing is essential for tracking materials, subcontractors, and labour — and required for audit defense.

Do contractors need to collect receipts from subcontractors?

Yes. Missing documentation is one of the top reasons CRA denies deductions.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps renovation contractors stay compliant while maximizing tax deductions. Whether you’re a sole proprietor or running a growing renovation company, our expert team ensures precision, transparency, and protection from audit risk.