Federal Home Renovation Tax Credit

The 2009 Federal Budget proposed a temporary home renovation tax credit for individual taxpayers in the 2009 tax year. The Government has not yet passed legislation to enact this proposal, but it appears likely that the proposal will become law. 

In this article we will answer the questions most frequently asked by our clients recently regarding this proposed new credit.

When must the costs be incurred?

The credit applies to goods purchased or work performed after January 27, 2009 and before February 1, 2010. If a contract was already in place prior to January 28, 2009 for work to be done, those contract costs will not qualify for the credit.

How much is the credit and how do I claim it?

The credit is a 15% non-refundable tax credit that may be claimed on your 2009 personal tax return. It applies to eligible costs more than $1,000 but not exceeding $10,000. As an example, if you spend $8,000 on qualified costs, you could claim $1,050 ($7,000 x 15%). The maximum claim available is $1,350 ($9,000 x 15%). This credit is claimable against federal income tax that you would otherwise owe.

Can each partner/spouse claim a credit?

No. There is one tax credit per family, being you, your spouse/partner, and children who are under 18 years of age at the end of 2009. The credit may be shared amongst members of the family.

Do the renovations have to be to my home or can they be done to a rental property or cottage?

Generally, the renovations must be incurred in relation to an individual's principal residence. As a result, renovations to your cottage may qualify if your cottage is owned by you and ordinarily inhabited by you, your spouse or partner, or your children. Renovations to a property that is used entirely for the purpose of earning business or rental income will not qualify. If a portion of your home is used for earning business or rental income, you will be allowed to claim the credit only for the renovations made in respect of the personal use portion of your home. 

Will costs for items like appliances, window blinds and hot tubs qualify?

For renovations to qualify, they must be of an enduring nature, integral to the dwelling, and must not retain their own value independent of the renovation. As a result, costs relating to appliances will not qualify. Window coverings such as curtains and draperies would likely not qualify, but blinds, shutters and shades, which would alter the nature of the dwelling if removed and which are attached to your home, likely would qualify. With respect to hot tubs, it depends; the Canada Revenue Agency has indicated that the "plug and play" type of portable hot tub, which is not permanently wired into your home, would not qualify, but the larger types, that are wired directly into your home, would qualify. 

If I borrow money to do the renovation, can I include the cost of borrowing? 

No. Eligible costs specifically exclude interest costs. 

What are some other examples of costs that will qualify?

• building an addition, garage, deck, fence or storage shed
• renovating a room such as a basement, kitchen or bathroom
• costs of fixtures that are attached to your home, such as furnaces, fireplaces, central air, water heaters, water softeners, ceiling fans, light fixtures, etc.
• installing a well or septic system
• Installing a swimming pool
• painting your house (inside or out)
• re-shingling a roof
• installing or resurfacing a driveway
• installing new flooring
• laying new sod, shrubs, etc.

Do I have to submit the receipts with my 2009 personal tax return?

No. The receipts are not to be submitted with your tax return. However, you must retain them to substantiate your claim. It is important to ensure that your receipts provide sufficient detail to support your claim. You need to be able to show that the expenses were paid for by yourself or your partner, the date the costs were incurred, the type and quantity of goods purchased or services provided, and details regarding the vendor's name, business address and GST registration number.

Note that expenses incurred for goods or services provided from someone who is not dealing with you at arm's length (ie. generally someone related to you) will not qualify for the tax credit unless that person is registered for GST/HST. 

While the legislation is not yet law, this is the time of year when many taxpayers are incurring home costs. Ensure that you obtain and retain proper documentation to support this claim on your 2009 personal tax return. Contact your Collins Barrow advisor to discuss further strategies to help you maximize this potential tax credit opportunity.

Karen Sands, CA, is a Tax Partner in the Kingston office of Collins Barrow.