Budget offers tax credit for home renovations
In the 2009 federal budget, Finance Minister Jim Flaherty included a $3 billion tax credit for homeowners conducting renovations this year. The hope is that homeowners will take advantage of the opportunity to tackle some nagging project they themselves have been putting off.
Credit claims under this provision can add up to $1,350. Claims are to be made on 2009 tax returns and cover the full gamut of renovations - anything not considered maintenance or furniture replacement - costing between $1,000 and $10,000. The credit is applicable to work, materials purchased or agreements reached between January 27, 2009, and February 1, 2010.
"The use of tax credits will make the program of interest to many Canadians who own their own home," said Canadian Real Estate Association president, Calvin Lindberg, in a press release. "But the success will be tied in part to the availability of savings or credit, since the expense has to be paid before the tax credit is issued.
One question on the minds of renovators is: what will this mean for the industry's black-market? It has been a long, uphill battle for licenced renovators to convince homeowners to choose credentials over a lower price. To be eligible for the tax credit, however, one would have to produce a receipt. This should drive business towards licenced renovators.
Examples of the Benefits of the Home Renovation Tax Credit
The following examples illustrate how homeowners can benefit from the HRTC:
* Sally and Ed are a couple who have recently purchased a house. In response to the temporary HRTC, they decide to replace their old windows and improve the insulation in their home in 2009, instead of waiting, incurring $10,000 in expenditures. After taking into account the $1,000 minimum threshold, a 15-per-cent credit will be available on $9,000 in eligible expenditures, providing tax relief of $1,350.
* William and Marie are a couple who are planning to purchase a more energy-efficient furnace for their home, and build a deck at their cottage sometime later. To take full advantage of the temporary HRTC, they decide to do both projects in 2009 rather than waiting. They pay $5,000 for the furnace and $3,500 for the deck. They also decide to have the area around the deck landscaped for $2,500, bringing their total costs to $11,000 ($5,000 + $3,500 + $2,500). Marie claims a credit of $1,350 on the maximum allowable amount of $9,000.
* Karen and Heather are sisters who share ownership of a condominium unit. They each incur $7,500 in expenditures renovating the kitchen in the condo. Karen and Heather each claim a $975 credit on eligible expenditures of $6,500 ($7,500 - $1,000).
For more information, visit Government
Home Renovation Tax Credit web site.
