Home renovation tax credit 101
Home improvements during an economic recession? And an ever-softening real estate market? Are you kidding?
The Canadian government's 2009 Home Renovation Tax Credit (HRTC) may just be the stimulus homeowners need to get back into the home improvement game. With tax credits of up to $1,350, beleaguered homeowners can get some relief when they take on eligible fixer-upper projects totaling $1,000 to $10,000 between now and the taxation year ending February 1, 2010.
As with anything in life, however, there’s some fine print. styleathome.com waded through it so you won’t have to. Here’s what you need to know to cash in on the HRTC largesse.
Homeowners. (Sorry, tenants.)
Eligibility for the HRTC is family-based. "Family" is defined as you, your spouse or common-law partner and/or your kids. That means even if your home reno projects total over $15,000, for example, you can't claim the first $10,000 then have your spouse or child claim the remaining $5,000. (Why would an 18-year-old pay for new pot lights, anyway?) The maximum HRTC claim per family household is $10,000 and the maximum credit per family household will be $1,350.
However, if you co-own a house with another family (even your own extended family) that also resides in it (you bought a house with your brother and sister-in-law, say, and have separate units), each family can put in their own $1,000 to $10,000 claim for their own respective projects.
What properties qualify?
Your primary residence and cottage. Investment properties don't qualify. You can claim up to $10,000 for renovations done to your home and cottage combined but not $10,000 each.
What home improvements qualify?
The HRTC covers expenditures related to home improvement projects of a lasting nature. This covers both the interior and exterior of your house, as well as your lot.
Some examples of acceptable projects include:
• Renovating your kitchen or bath
• Installing new flooring
• Painting the interior or exterior of your home
• Building an extension, garage, deck, storage shed or fence
• Re-shingling the roof
• Putting in a new furnace or water heater
• Installing a fireplace
• Resurfacing your drive
• Laying new sod
• Replacing lighting fixtures and ceiling fans
What expenses are covered?
Acceptable expenditures for these projects above include:
• Goods (paint, building materials, fixtures, etc.),
• Services (labour, design consults, etc.)
• Rentals (renting a paint sprayer or nail gun, etc.)
• Permit fees
You'll need receipts for everything. Store receipts must be itemized, bear the date, plus the store’s company name, address and GST/HST number.
Professional invoices and service agreements also need to be dated, detail the work done and associated costs, cite the address on which work was performed and provide the service provider's company info (and GST number).
Invoices must be marked as paid in full and additionally, you must attach proof of your payment: a cancelled check or credit card slip.
What home improvements don’t qualify?
Things that don’t add to the intrinsic value of your property, or maintenance work which homeowners tend to do fairly regularly anyway, don’t qualify.
Some examples would be:
• Buying furniture and appliances
• Buying tools
• Professional or DIY carpet cleaning
• Hiring a maid service
• Maintenance contracts like furnace or duct cleaning, lawn care etc.
• Financing costs
How do I claim my tax credit?
Tally up those store receipts, professional invoices and rental receipts and enter your total on your 2009 income tax form. The 2009 form will have a special line devoted to the HRTC.
You won’t submit your receipts and invoices with your tax form, but definitely hold on to them in case the Tax Man wants to follow-up with you down the road.
Remember: if you hire a pro, hire a pro
The underground economy flourishes in Canada’s building and home improvement trades. But as anyone who’s seen even one episode of Holmes on Homes knows, you’re better off hiring a legit pro, not some shady discount contractor. Even more so if you want to qualify for the HRTC.
The HRTC will only recognize services rendered by professional contractors (plumbers, electricians, painters, architects, etc.) with registered businesses. Neither that handyman up the street nor your handy brother-in-law can invoice you for work they’ve done on your home, unless they actually have GST registration numbers.
For more information
Visit Canada Revenue Agency’s HRTC webpage at www.cra-arc.gc.ca/hrtc