If you are planning on renovating your house, cottage or condominium unit this year,
you may qualify for the new temporary Home Renovation Tax Credit (HRTC).
Introduced in the 2009 federal budget, the HRTC offers a 15 percent non-refundable
tax credit for certain renovation costs incurred between January 27, 2009 and
February 1, 2010. The budget also introduced a new tax credit for first-time buyers and enhanced the existing Home Buyers’ Plan. Details of these changes are discussed below.How much is the HRTC worth?
You can claim the HRTC for eligible costs over $1,000 but not more than $10,000, for
a maximum credit of $1,350. The HRTC can be claimed on your 2009 tax return for
all eligible costs incurred to February 1, 2010.

Example
The 2009 budget documents provide the following example: Sally and Ed recently
purchased a house. To take advantage of the HRTC, they decide to replace their old
windows and improve the insulation in their home in 2009, incurring $10,000 in
expenditures. After taking into account the $1,000 minimum threshold, a 15 percent
credit will be available on $9,000 in eligible expenditures, providing tax relief of
$1,350.

What kinds of renovations qualify for the HRTC?
You can claim renovation costs for projects such as finishing a basement or remodelling a kitchen, along with associated expenses such as building permits, professional services, equipment rentals and incidental expenses. Most renovations or alterations to an eligible dwelling qualify, provided the renovation is of an enduring nature and is integral to the dwelling.

Examples of eligible expenses you can claim include:

  • Renovating a kitchen, bathroom, or basement
  • New carpet or hardwood floors
  • Building an addition, deck, fence or retaining wall
  • A new furnace or water heater
  • Painting the interior or exterior of a house
  • Resurfacing a driveway
  • Laying new sod

Expenses you cannot claim for the credit include:

  • Furniture and appliances (e.g., refrigerator, stove, couch)
  • Purchase of tools
  • Carpet cleaning
  • Maintenance contracts (e.g., furnace cleaning, snow removal, lawn care, pool cleaning)
  • Financing costs associated with a renovation (e.g., mortgage interest)

If you live in a condominium or a co-operative housing corporation, renovations on
your unit will also be eligible for the credit, as are your share of eligible costs used to
improve common areas.

If you rent out part of your home or have a home office for earning business income,
you can claim the credit for personal-use areas of the home only. You can also claim
the credit for part of the cost of common area improvements and renovations that
benefit the housing unit as a whole (such as re-shingling a roof). In this case, you
must divide the cost between personal and income-earning use. The qualifying
amount of your costs is calculated based on the personal-use fraction of your home
(i.e., calculated in the same way as your deductible home office expenses).

Note that you cannot claim the credit if the renovations are done by a related person
(e.g., a parent, a brother, sister, or brother- or sister-in-law) or a non-arm’s-length
person unless they are registered for Goods and Services Tax/Harmonized Sales
Tax.

What qualifies as an eligible dwelling?
Generally, a housing unit is considered eligible to be your principal residence where it
is owned and ordinarily inhabited by you, your spouse or common-law partner or your
children.

Who can claim the credit?
Because eligibility for the HRTC is family-based, your spouse or common-law partner
can share the credit with you. If you share ownership of a house, cottage or condominium unit with another family, both families are eligible for their own HRTC credit.

Example
In a second example provided in the budget documents, Karen and Heather are
sisters who share ownership of a condominium unit. They each incur $7,500 in
expenditures renovating the kitchen in the condo. Karen and Heather each claim a
$975 credit on eligible expenditures of $6,500 ($7,500 – $1,000 × 15%).
You can apply for the full amount of the HRTC even if you receive other government
tax credits or grants. For instance, if you make an eligible expenditure that also
qualifies for the Medical Expense Tax Credit (METC), you can claim both the HRTC
and the METC.

Keep your receipts
In order to take full advantage of the HRTC, you must document all eligible
expenditures. Agreements, invoices and receipts must clearly identify the type and
quantity of goods purchased or services provided, including the following information:

 

  • The name of the vendor/contractor, their business address and their GST/HST registration number (if any)
  • A description of the goods and the date purchased
  • The date the work was performed or the goods were delivered (keep your
    delivery slip as proof)
  • A description of the work, including the address where it was performed
  • The amount of the invoice
  • Proof of payment.

 

You do not have to file your receipts with your 2009 tax return, but you must keep
them on hand in case the CRA asks to see them.

New credit for first time home buyers
If you plan on acquiring your first home this year, the 2009 federal budget also
introduced a new non-refundable tax credit for first-time home buyers. This credit is
available for qualifying home purchases that close after January 27, 2009 and is
calculated based on the amount of $5,000 times the lowest personal income tax rate
for that year (currently, 15%). Thus, the current maximum value of the credit is $750.
The credit can be claimed by you or your spouse or common-law partner. In general,
to qualify, neither of you can have owned nor lived in another home in the last five
years, up to the year the new home was purchased. A qualifying home is one that is
currently eligible for the Home Buyers’ Plan (see below) that you or your spouse or
common-law partner intend to occupy as the principal place of residence not later
than one year after is acquisition.

The credit is also available for certain home purchases by or for the benefit of
a disabled family member who is eligible for the disability tax credit.

Home Buyers’ Plan threshold increased
In addition, the budget increases the amount that first-time home buyers can
withdraw tax-free from a Registered Retirement Savings Plan (RRSP) to
purchase or build a new home to $25,000 (up from $20,000). The new limit
applies to withdrawals made after January 27, 2009.

This information was gladly passed by
Marc-André Rocher a Mortgage Specialist at RBC Royal Bank Montreal South-West
Tel: 514.591.3815
marc-andre.rocher@rbc.com


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