As part of the 2009 Budget, the Federal Government proposed the Home Renovation Tax Credit (the “HRTC”), a non-refundable tax credit for work performed or goods acquired in respect of a dwelling unit that is owned and used personally by a taxpayer or by the taxpayer’s spouse, common-law partner or children.
Calculation of the HRTC:
The credit is based on eligible expenditures for work performed or goods acquired after January 27, 2009 and before February 1, 2010. A family (an individual or an individual and his or her spouse or common law partner, and children under the age of 18 at the end of 2009) is entitled to a single credit. The HRTC applies to expenditures of more than $1,000, but not more than $10,000, resulting in a maximum credit of $1,350 ($9,000 X 15%).
Eligibility for the HRTC:
In order to qualify of the HRTC, expenditures must be of an enduring nature, integral to the dwelling and must include the cost of labour and professional services, building materials, fixtures, rentals and permits. Some examples of the expenditures that qualify for the HRTC are:
- renovations to a kitchen, bathroom or basement;
- the cost of painting, installation of carpet or flooring;
- the replacement cost of a heating or air conditioning system;
- the installation costs of a swimming pool;
- the costs of upgrading insulation, resurfacing a driveway or replacing a lawn with new sod; and
- associated costs such as permits, professional services, equipment rentals and incidental expenses.
Among the expenditures that will not qualify for the HRTC are:
- financing costs;
- routine repairs and maintenance;
- expenditures that are not integral to the dwelling;
- indirect expenditures that retain a value independent of the renovation; and
- expenditures for appliances, furniture, tools and cleaning.
Expenditures will not be eligible if the goods or services are provided by a person not dealing at arm’s length with the individual, unless that person is registered for the GST/HST under the Excise Tax Act.
Eligible expenditures incurred for both a home and cottage, which are both used personally by the taxpayer or by his or her family, will each qualify for the HRTC, however it is important to remember that the maximum amount of eligible expenditures that may be claimed in respect of the HRTC is $10,000 per family. Eligible expenditures will not be reduced by other government tax credits or grants to which the individual may be entitled.
Individuals who rent out part of their personal residence to earn income or who use part of their personal residence to earn business income will only be allowed to claim the credit for expenses in relation to the personal-use areas of the residence. Expenses for common areas (i.e. a roof) must be divided between personal use and income-earning use for the purpose of obtaining the HRTC.
The Canada Revenue Agency (the “CRA”) requires acceptable documentation evidencing the eligibility of the expenditures. Such evidence may include documentation, agreements, invoices and receipts that clearly identify the type and quantity of goods or services provided. It is important to provide to the CRA the following:
- information identifying the vendor/contractor, their business address and GST/HST registration number;
- a description of the goods and the date of purchase;
- the date that the goods were delivered or that the services were performed;
- a description of the work performed;
- the amount of the invoice; and
- proof of payment.