1. What is the Home Renovation Tax Credit (HRTC)?
The proposed HRTC is a non-refundable tax credit for eligible expenses incurred for work performed or goods acquired in respect of an eligible dwelling.
2. What is meant by eligible dwelling?
An eligible dwelling of an individual is a housing unit located in Canada. All the following conditions must be met:
- You own at the time of the renovation or alteration, alone or jointly with another person, the housing unit or share of the capital stock of a co-operative housing corporation you acquired solely to get the right to inhabit the housing unit owned by that corporation; and
- You, your current or former spouse, or your current or former common-law partner, or any of your or your spouse or common-law partner’s children ordinarily inhabited the housing unit at any time during the eligible period.
Generally, land of ½ hectare (1.24 acres), including the land upon which your housing unit stands and any portion of the adjoining land, will be considered part of your eligible dwelling.
3. What is the eligible period?
The credit is based on eligible expenses for work performed or goods acquired after January 27, 2009, and before February 1, 2010. Eligible expenses for goods acquired during this period, even if they are installed after January 2010, will still qualify. If an eligible expense involves work performed by a contractor or a third party, and the work is not completed by the end of the eligible period, only the portion that is completed before February 1, 2010 will qualify even if a payment is made. Expenses incurred pursuant to an agreement that was entered into before January 28, 2009, will not be eligible for the credit.
4. Who is eligible for the credit?
Eligibility for the HRTC is family based. Eligible family members include you and your spouse or common-law partner, and your or your spouse’s or common-law partner’s children who are under 18 years of age at the end of 2009 (other than a child who, at any time during the eligible period – after January 27, 2009, and before February 1, 2010 – was married, was in a common-law relationship, or had a child).
The claim can be split among eligible family members but the total amount claimed cannot exceed the maximum allowable.
If two or more families share the ownership of an eligible dwelling, each family can claim its own credit (i.e., each up to $1,350) that is calculated on its respective eligible expenses.
5. How is the credit calculated?
The HRTC is only available for the 2009 tax year and applies to the total eligible expenses of more than $1,000, but not more than $10,000, resulting in a maximum non-refundable tax creditof $1,350 [($10,000 – $1,000) x 15%].
6. What are eligible expenses?
The expenses are eligible when they are incurred by an eligible family member and are directly attributable to a renovation or alteration to an eligible dwelling(including the land that forms part of the eligible dwelling) and are of an enduring nature and integral to the dwelling. As a general rule, if the item you purchase will not become a permanent part of your dwelling, it is not eligible. There are items, however, that have been explicitly excluded (see below).
All expenses must be supported by acceptable documentation. Keep it in case the CRA asks to see it.
Some businesses or individuals may assert that certain items qualify for the HRTC. It is important to remember that you are responsible for ensuring that all eligibility requirements are met when you claim this credit on your tax return.
7. What types of expenses are not eligible?
The following expenses will not be eligible for the HRTC:
- Furniture, household appliances, and electronic home-entertainment devices
- Purchasing of tools
- Carpet cleaning
- House cleaning
- Maintenance contracts (e.g., furnace cleaning, snow removal, lawn care, and pool cleaning)
- Financing costs
- Amounts paid as part of the purchase of your new house, including “upgrades”
- Expenses to acquire goods that have been previously used or leased by you or an eligible family member (e.g., hot water tank)
- Expenses incurred with respect to the parts of an eligible dwelling used for income generating purposes (see question 19 for additional details)
8. How will I claim the HRTC?
A new schedule will be included in your 2009 tax package to allow you to list your eligible expenses and to calculate the amount you can claim. Also, a new line will be added to Schedule 1 to claim the HRTC.
If you are filing a paper return, do not include your receipts or documents supporting your claim. Keep them in case the CRA asks to see them later. You must however attach the new HRTC schedule to your paper return.
9. What does the CRA consider to be acceptable documentation?
Documentation, such as agreements, invoices, and receipts, must clearly identify the type and quantity of goods purchased or services provided, including, but not limited to, the following information, as applicable:
- information that clearly identifies the vendor/contractor, their business address and the GST/HST registration number;
- a description of the goods and the date when the goods were purchased;
- the date when the goods were delivered (keep your delivery slip as proof) and/or when the work or services were performed;
- a description of the work performed including the address where the work was performed;
- the amount of the invoice; and
- proof of payment. Receipts or invoices must indicate paid in full or be accompanied by other proof of payment, such as a credit card slip or cancelled cheque; and
- a statement from the co-operative housing corporation or condominium corporation (or, for civil law, a syndicate of co-owners) signed by an authorized individual identifying:
- the amounts incurred for the renovation or the alteration work;
- as a condominium owner, your portion of these expenses if the work is performed on common areas;
- information that clearly identifies the vendor/contractor, their business address and, if applicable, their GST/HST registration number; and
- a description of the work performed and the dates when the work or services were performed.
10. Do I have to submit any supporting documents with my income tax return?
No. You will not need to submit any documentation (except the new schedule) when you file your paper return. However, you must keep the documentation in case the CRA asks for it in verifying your claim. If you file electronically, keep all documentation in case the CRA asks to see it.
11. If I own both a house and a cottage and incur eligible expenses for both, are both sets of expenses eligible for the HRTC?
If you own, alone or jointly with another person, both a house and a cottage and if you, your current or former spouse or your current or former common-law partner or any of your or your spouse or common-law partner’s children ordinarily inhabited each property at any time during the eligible period, eligible expenses incurred for both properties will generally qualify for the HRTC. However, the maximum amount of eligible expenses you can claim for the HRTC is $10,000.
If the main reason for owning the recreational property is to gain or produce income, expenses related to the property are not eligible for the HRTC. However, you will not be considered to own the property to gain or produce income if you receive only incidental income related to the property.
12. If during the eligible period, I incurred eligible expenses for a house that I sold and also incurred eligible expenses for my new house, do both sets of expenses qualify for the HRTC?
If during the eligible period you sold and purchased an eligible dwelling, eligible expenses that you incurred for both dwellings will normally qualify for the HRTC. However, the maximum amount of eligible expenses you can claim for the HRTC is $10,000.
13. Will a renovation or alteration qualify for the HRTC if I perform the work myself?
If you do the work yourself, the eligible expenses include expenses for building materials, fixtures, equipment rentals, building plans and permits. However, eligible expenses would not include the value of your labour or tools.
14. I am planning to replace my windows in 2009: can I hire my brother-in-law to help me out and still be eligible?
It depends. Expenses are not eligible if the goods or services are provided by a person related to you, unless that person is registered for the Goods and Services Tax/Harmonized Sales Tax (GST/HST) under the Excise Tax Act. So, in your case, if your brother-in-law is registered for the GST/HST and if all other conditions are met, the expense will be eligible for the credit.
15. Does work performed by electricians, plumbers, carpenters, architects, etc. qualify?
Generally, work performed by electricians, plumbers, carpenters, architects, etc. in respect of an eligible expense qualifies for the HRTC. If you’re planning on hiring a contractor to do construction, renovation, or repair work on your home, get it in writing!
16. I rent out my basement. If I renovate the basement for my tenant, will I be allowed to claim the credit?
No. If you earn business or rental income from part of an eligible dwelling, you can only claim the amount for expenses incurred for the personal-use areas of your dwelling.
For expenses incurred for common areas or that benefit the housing unit as a whole (such as re-shingling a roof), you must divide the expense between personal use and income-earning use.
17. Will the credit be reduced by other government grants or credits that I may receive for the same expenses?
No. Eligible expenses are not reduced by government tax credits or grants to which you may be entitled. For example, if you qualify for and take advantage of a grant under the ecoENERGY – Retrofit Homes program, you can receive the grant and claim the HRTC for the same expense.
18. The Budget also mentions the ecoENERGY Retrofit – Homes grant. What is it and how can I obtain more information?
The ecoENERGY Retrofit – Homes grant is administered by Natural Resources Canada. The grant applies to a host of measures that reduce energy consumption and provide for a cleaner environment. Home and property owners could be eligible for federal grants of up to $5,000 to offset the cost of making energy efficiency improvements to their home or property. Most provinces and territories have complementary programs that offer additional financial assistance based on the results of the ecoENERGY Retrofit evaluation.
For more information, visit the ecoAction Web site.
You can always CONTACT US to discuss your particular situation.