The Federal Budget this year was uncharacteristically early - being delivered on January 27th.  We will cover the entire Budget in our spring edition of Insight; however, this Budget included an unusual and time-sensitive initiative intended to stimulate the domestic economy: the Home Renovation Tax Credit.   

 

Canadian home owners have one year from the budget date to undertake renovations and receive a federal tax credit subsidy.  We inaugurate the timeliness of Insight Lite with detailed coverage of this new temporary tax-relief provision. 

 

It only applies to services performed, or goods acquired, after January 27, 2009 and before February 1, 2010.  Work performed or expenditures incurred under a contract that was entered into before January 28, 2009 may not be claimed.  The HRTC is only claimable on an individual's 2009 tax return; therefore, expenditures incurred in January of 2010 must be claimed on the 2009 return.  Individuals are permitted to claim the 15% federal non-refundable tax credit.  The maximum credit is $1,350 because it only applies to expenditures that are greater than $1,000 up to a maximum of $10,000.
 
The HRTC is limited to one per family (which includes an individual, the individual's spouse or common-law partner and children who are under 18 years of age).  To the extent that an individual is unable to utilize the entire HRTC, the unused portion may be used by other family members.  Where two or more families share ownership of an eligible dwelling, each family will be entitled to claim its own HRTC, as if the family owned the dwelling alone.
 
In order to claim the credit, the dwelling must be eligible to be a principal residence of the individual or of one or more of the individual's other family members.  This means that both a city home and a recreational cottage will qualify simultaneously under this program.  For condominiums and co-operative housing corporations, an individual's share of eligible expenditures incurred in respect of common areas will also qualify for the tax credit.  Obviously these will have to be ascertained from the strata organization.  Where an individual earns business or rental income from part of the principal residence, expenditures that relate to common areas or that benefit the housing unit as a whole will qualify as eligible expenditures for HRTC tax purposes, subject to limits established under existing CRA administrative practices which apply when determining how business or rental income and expenditures are allocated between personal use and income-earning use.
 
The types of expenditures that will qualify for the credit will be subject to a variety of restrictions.  Eligible expenditures must be incurred in relation to renovations or alterations of an eligible dwelling which are of an enduring nature and integral to the dwelling.  This test would exclude expenditures for routine repairs, maintenance and financing costs of a renovation.  Eligible expenditures include building materials, fixtures, equipment rentals, permits, labour and professional services.
 
Taxpayers' entitlements to HRTC will not be affected by other tax credits, grants or other programs.  The claims must be supported by receipts and the service providers should be registered for GST/HST purposes.  Eligible expenditures provided by a non-arm's length party will qualify only if that person is a GST registrant. 
 
Examples of Eligible Expenditures:
 
Renovating a kitchen, bathroom or basement
Acquiring new carpet or hardwood floors
Building an addition, deck, fence or retaining wall
Acquiring a new furnace or water heater
Painting the interior or exterior of a house
Resurfacing a driveway
Laying new sod

Landscaping

Replacing windows or insulation
Re-shingling a roof
 
Examples of Ineligible Expenditures:
 
Purchases of furniture and appliances (e.g. refrigerator, stove, and couch, draperies, audio-visual electronics, or tools)
Routine property maintenance, like carpet cleaning, furnace cleaning, snow removal, lawn care, and pool cleaning