Home Renovation Tax Credit (HRTC)

The following questions and answers are based on proposed measures announced in the 2009 budget on January 27, 2009, but that have not yet been enacted by Parliament.

1. What is the Home Renovation Tax Credit (HRTC)?
The proposed HRTC is a non-refundable tax credit for work performed or goods acquired in respect of an eligible dwelling.
2. What is meant by eligible dwelling?
An eligible dwelling is a housing unit that is eligible to be an individual's principal residence or that of one or more of their family members, at any time between January 27, 2009 and February 1, 2010. In general, 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, the individual's spouse or common-law partner, or their children. This means that any dwelling that you own and use personally could qualify, including your home or your cottage.
3. What is the eligibility period?
The credit will be based on eligible expenditures for work performed or goods acquired after January 27, 2009, and before February 1, 2010. Expenditures incurred pursuant to an agreement that was entered into before January 28, 2009, will not be eligible for the credit.
4. Who will be eligible for the credit?
Eligibility for the HRTC will be family based. A family will generally be considered to consist of an individual or an individual and his or her spouse or common-law partner, including children who will be under 18 years of age, at the end of 2009. A family will be allowed a single credit that may be shared within the family.
If two or more families share the ownership of an eligible dwelling, each family will be eligible for their own separate credit (i.e. each up to $1,350) that will be calculated on their respective eligible expenditures.
5. How will the credit be calculated?
The credit will only be available for the 2009 tax year and applies to eligible expenditures of more than $1,000, but not more than $10,000, resulting in a maximum credit of $1,350 ($9,000 x 15%).
6. What are eligible expenditures?
To be eligible, expenditures incurred in relation to a renovation or alteration to an eligible dwelling (or the land that forms part of the eligible dwelling) must be of an enduring nature and integral to the dwelling, and includes the cost of labour and professional services, building materials, fixtures, rentals, and permits.
Eligible expenditures must be supported by acceptable documentation.
7. 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:
information that clearly identifies the vendor/contractor, their business address and, if applicable, 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.
To verify whether someone is registered for GST/HST, please consult the GST/HST Registry.
8. If I own both a house and a cottage and incur eligible expenditures for both, are both sets of expenditures eligible for the HRTC?
If you own and use your home and cottage personally, eligible expenditures incurred for both properties will normally qualify for the HRTC. Please note that the maximum amount of eligible expenditures you can claim in respect of the HRTC is $10,000 per family.
9. 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. Expenditures will not be eligible if the related goods or services are provided by a person not dealing at arm's length with the individual, unless that person is registered for the Goods and Services Tax/Harmonized Sales Tax under the Excise Tax Act. So, in your case, if your brother-in-law is registered for GST/HST and if all other conditions are met, the expenditure will be eligible for the credit.
10. Will expenditures for the common areas of condominiums and co-operative housing corporations qualify for the credit?
In the case of condominiums and co-operative housing corporations, the individual's share of the cost of eligible expenditures for common areas will qualify.
11. I rent out my basement. If I renovate the basement for my tenant, will I be allowed to claim the credit?
No. Individuals who earn business or rental income from part of their principal residence will be allowed to claim the credit only for expenditures made for the personal-use areas of the residence.
For expenditures made 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. For further information, please consult the Business and Professional Income Guide or the Rental Income Guide, as applicable.
12. If an eligible expenditure also qualifies for the Medical Expense Tax Credit (METC), will I be allowed to claim both the HRTC and METC?
Yes. Where an eligible expenditure qualifies for the METC the individual will be permitted to claim both the METC and the HRTC for that expenditure.
13. Will the credit be reduced by other government grants or credits that I may receive for the same expenditures?
No. Eligible expenditures will not be reduced by other government tax credits or grants that the individual may be entitled to.
14. Does work performed by electricians, plumbers, carpenters, architects, etc. qualify?
Generally, work performed by electricians, plumbers, carpenters, architects, etc. in respect of an eligible expenditure will qualify. See below for examples of eligible expenditures. If you're planning on hiring a contractor to do construction, renovation, or repair work on your home, the Get it in Writing! Web site has information that will help you.
15. Could you provide me with some examples of eligible and ineligible expenditures?
Yes, some examples are:

Eligible
Renovating a kitchen, bathroom or basement
New carpet or hardwood floors
Building an addition, garage, deck, garden/storage shed, fence
Re-shingling a roof
A new furnace, woodstove, boiler, fireplace, water softener or water heater
A new driveway or resurfacing a driveway
Painting of interior or exterior of a house
Window coverings directly attached to the window frame and whose removal would alter the nature of the dwelling
Laying new sod
Swimming Pools (Permanent - in ground and above ground)
Fixtures – lights, fans, etc.
Associated costs such as permits, professional services, equipment rentals and incidental expenses.

Ineligible
Furniture, appliances, and audio and visual electronics
Purchasing of tools
Cleaning carpets
House cleaning
Maintenance contracts (e.g. furnace cleaning, snow removal, lawn care, and pool cleaning)
Financing costs
16. What types of expenditures will not qualify?
The following expenditures will not be eligible for the HRTC:
the cost of routine repairs and maintenance normally performed on an annual or more frequent basis;
expenditures that are not integral to the dwelling, and other indirect expenditures that retain a value independent of the renovation;
expenditures for appliances and audio-visual electronics; and
financing costs.
17. Do I have to submit any supporting documents with my income tax return?
No. However, you must ensure that this information is available, should it be requested by the CRA.
18. How will I claim the HRTC?
A new line will be incorporated in the 2009 personal income tax return to allow you to claim the credit.
19. Where can I get more information about this new tax credit?
Additional information will be posted on the CRA's Web site as it becomes available. In the meantime, please see the Department of Finance's Budget 2009 documents for details.
20. 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 information on how you can qualify, please consult the ecoACTION Web site.

Source: CRA website

Personal Tax Prospects

The federal government released the 2009 budget on January 27, 2009. Here's a summary of the significant proposals in the budget with regards to Personal Tax:

● Effective in 2009, the basic personal amount, the amount for a spouse, common-law partner or fully dependent relative will increase to $10,320 from $9,600 in 2008.
● The upper limit of the first personal income tax bracket (15%) will rise to $40,726 in 2009 from $37,855 in 2008.
● The upper limit of the second personal income tax bracket (22%) will rise to $81,452 in 2009 from $75,769 in 2008.
● For 2010 and subsequent years, the increased amounts and bracket limits will be indexed to inflation.
● A new Home Renovation Tax Credit (HRTC) has been introduced. The HRTC is a 15% non-refundable tax credit available to homeowners for home improvements to a principal residence. Eligible expenditures include building materials and labour expenditures in excess of $1,000 and up to $10,000 for a renovation that is of an enduring nature, made after January 27, 2009 and before February 1, 2010. The maximum tax credit is $1,350. The credit is not available for agreements dated prior to January 28, 2009.
● The withdrawal limit from an RRSP under the Home Buyers’ Plan increases from $20,000 to $25,000 for withdrawals made after January 27, 2009.
● A new First-Time Home Buyers’ Tax Credit has been introduced which is based on an amount of $5,000 for first time home buyers who acquire a qualifying home after January 27, 2009. The lowest personal tax rate for the year is used to calculate the non-refundable tax credit. The credit is also available for certain acquisitions of a home by or for the use of an individual who qualifies for the disability tax credit. This will produce a one-time tax savings of $750.
● The budget proposed that $580 million be added to the Working Income Tax Benefit program for 2009 and the following years.
● For 2009, the age amount for Canadian taxpayers 65 and older has been increased by $1,000 from $5,408 to $6,408. For subsequent years, the age amount will be indexed. The income level at which the Age Credit is completely phased out rises to $75,032 from $68,365. The income-tested credit begins to be phased out at $32,312.
● The Canada Child Tax Benefit (CCTB) and the National Child Benefit Income supplement (NCBs) are based on income. The income levels have been increased to match the rise of the upper limit of the lowest personal tax bracket. The proposed level at which the CCTB starts to be phased out increases to $40,726 while the income level at which the NCBs begin to phase out rises by $1,894 and will be fully phased out at $40,726

Business Tax Prospects

The federal government released the 2009 budget on January 27, 2009. here's a summary of the significant proposals in the budget.

● Effective January 1, 2009 the small business limit was increased to $500,000 from $400,000. The increase will be prorated for non-calendar year-ends.
● For eligible new computers and systems software used in Canada, purchased after January 27, 2009 and prior to February 2011, a capital cost allowance (CCA) rate of 100% applies, with no half-year rule.
● The budget proposes to increase to $350,000 ($500,000 if acquiring real property) the maximum eligible loan amount that a small business can access under the Small Business Financing Program.
● For manufacturing and processing equipment, the 50% straight-line CCA rate has been extended for purchases of eligible equipment in 2010 and 2011. The half-year rule will apply such that the full write off may be claimed over three taxation years.
● The budget proposed to freeze the Employment Insurance (EI) rates at $1.73 per $100 of insurable earnings for both 2009 and 2010.
● The EI program offers benefits to qualifying workers willing to enter into worksharing agreements. For 2009 and 2010, the budget proposes to extend work -sharing agreements by 14 weeks to a maximum of 52 weeks. The budget increases all regular EI benefit entitlements by five weeks to a maximum of 50 weeks for 2009 and 2010