Home Renovation Tax Credit
Geoff Garland, Tax Partner
Building Connections
In an effort to keep Canadians spending, thus improving current economic conditions, the government has introduced a Home Renovation Tax Credit. “Every time Canadians invest in home renovations, they are helping to create construction and building-supplies jobs in their own communities,” said the Prime Minister. “By providing an incentive for Canadians to invest in their homes, we are also encouraging them to invest in local jobs.”
The credit is a non-refundable tax credit for work performed or goods acquired in respect of an eligible dwelling. An eligible dwelling is a housing unit that is eligible to be an individual’s principal residence. A housing unit is considered eligible to be an individual’s principal residence where it is owned by the individual and ordinarily inhabited by the individual, their spouse or common law partner, or their children. This means that any dwelling that you own and use personally could qualify, including your home and/or your cottage.
The credit will be calculated on expenditures made after January 27, 2009 and before February 1, 2010 for work undertaken or goods acquired on an eligible dwelling. However, expenditures made under an agreement that was entered into before January 28, 2009, will not be eligible for the credit no matter when the amount is paid. An eligible dwelling is any dwelling that would otherwise qualify as the taxpayer’s principal residence (i.e. your home and/or cottage).
The maximum credit is $1,350 and is obtained once $10,000 has been spent on qualifying renovations. Similar to other credits, there is a minimum amount that must be spent before any credit is available. In this case, the homeowner must spend more than $1,000 to be eligible for any amount. Any amount over $1,000 (to a maximum of $10,000) is eligible for a 15% credit. For example, renovations costing $5,000 would result in a credit of $600 calculated as $5,000 minus $1,000 times 15%. The maximum credit of $1,350 is similarly calculated as $10,000 minus $1,000 times 15%.
Eligibility for the credit will be family based in that a family will be allowed a single credit that may be shared within the family. A family will be considered to consist of the individual or an individual and their spouse or common-law partner, including children who will be under 18 years of age at the end of 2009. Regardless of how many eligible expenditures are materials and labour that are of an enduring nature and integral to the dwelling. Examples cited but not limited to include new flooring, a new deck, a new furnace, a new fence, and interior/exterior painting. Routine maintenance costs are not eligible. Expenditures will also not be eligible if the related goods or services are provided by a person not dealing at arm’s length with the individual, unless the person is registered for GST. Examples of items not eligible include furniture, appliances, audio equipment, cleaning carpets and the purchase of tools.
The credit will be calculated as part of your 2009 personal income tax return. To support the claim for the credit it will be necessary to keep the proper receipts that identify the name/address of the contractor, a description of the work performed, a description of the goods purchased and the date purchased, the amount of the invoice, and proof that the invoice was paid. Time spent by the homeowner in carrying out their own improvements will not qualify for the credit and amounts paid to relatives will only qualify if that person is registered for the GST.
Where an individual owns and uses their home and cottage personally, eligible expenditures incurred for both properties will normally qualify, however the maximum amount of eligible expenditures you can claim in respect of the credit is $10,000 per family.
Homeowners considering renovating should also explore the federal ecoEnergy Retrofit-Homes Program where homeowners could be eligible for federal grants of up to $5,000 as well as other provincial credits and rebates which may be available available.
For further information please consult your professional advisor to see if your expenditures will qualify for the credit.
Geoff Garland is a Tax Partner at BDO Dunwoody LLP, with over 8 years experience as a CA, and provides tax advice to entrepreneurial-minded businesses. With experience in general practice, Geoff is knowledgeable regarding tax compliance and planning services, and works out of the Winnipeg office. Over the years, Geoff has provided a range of tax and related services to a wide range of clients in the automotive, agriculture, manufacturing and construction industries. He works with clients to spark new ideas and find innovative solutions. He can be reached at 204.926.7263 or ggarland@bdo.ca.
