What You need To Know About The Home Renovation Tax Credit

by Tax Guy - Burlington Accountant on June 15, 2009 Print This Post Print This Post

My response to a reader question about the Home Renovation Tax Credit has been one of the most popular posts on Canadian Tax Resource to date. A number of readers have posted questions and I received the same amount of question and more by e-mail.

I though it would make sense to summarize these questions into a single post and include a resource box of helpful links.

#1. The Home Renovation tax Credit is not law yet!

That’s right there is no law on the books for the HRTC. In fact, at the time of writing there wasn’t draft legislation before parliament. Since the eligible period ends February 1, 2010, I would suspect we would see a bill in parliament very soon.

new-construction

#2. Can I do the renovations myself?

Yes! You can do any renovation yourself but you can only claim the materials used in the renovation for the credit. For example, you could not claim your own time as an eligible expense.

#3. Can I claim renovations already done?

No. Renovations must have started after January 28, 2009 and completed before February 1, 2010.

#4. Can I use the HRTC for work on my cottage?

The HRTC applies only to work done or material acquired for renovations on an eligible dwelling. The eligible dwelling is you principal residence which by definition would be the property owned and ordinarily inhabited by you, your spouse or common-law partner or your children.

#5. What is a renovation?

A renovation is work done or an alteration to the property that is enduring in nature. The CRA has posted a list of eligible and ineligible expenses on their website.

#6. How much is the credit?

The credit (federally) is 15% of eligible expenses that exceed $1,000 but not more than $10,000. If your renovation costs $1,000 – your credit is $0. If you spend $10,000 your credit is $1,350.

About The Tax Guy...

Dean Paley CGA CFP is a Burlington accountant and financial planner who services individuals and business owners locally, nationally and internationally. Dean has appeared in the National Post, Toronto Star and Metro News.

To find out more, visit Dean's website Dean Paley CGA CFP or connect via Twitter @DeanPaleyCGACFP.

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{ 6 comments }

Dan June 15, 2009 at 8:15 am

Any chances MPAC could use the HRTC data as ammunition to raise property tax rates against those who filed a claim?

Some folks are concerned that HRTC filers could be targeted for premium increases based on them “bettering and improving” their properties.

Tax Guy June 15, 2009 at 9:47 am

@ Dan:
Highly unlikely. MPAC is an Ontario provincial government entity and the CRA is federal. There is no sharing of information unless you have specifically allowed it.

Tom Cotie July 15, 2009 at 3:01 pm

If I incurred eligible expenses on my principal residence after February 2009 and then sold my home and bought another or rented would the expenses still be deductable.

Tax Guy July 15, 2009 at 3:06 pm

@ Tom:
As long as it was your principal residence at the time the renovations were done and it was during the eligible period.

Carol Shanks July 22, 2009 at 8:37 pm

I too am concerned about the implication the home renovation tax credit may have for future increase in my property tax…AND/OR on personal income tax. Is it the $1,350 (or any part thereof) is added to my ‘income’ and therefore I’ll be ‘taxed’ on the credit at a future date?? I’m not aware of the ‘government GIVING anything to taxpayers without a ‘claw’ attached to the ‘gift’….

Tax Guy July 22, 2009 at 9:41 pm

@ Carol

The HRTC was designed to stimulate a depressed economy by encouraging peopel to “continue” to renovate properties. While this may affect property values, I’m not sure it would have that much impact.

The HRTC is a dollar for dollar reduction in tax payable as opposed to an addition to income. There would be no future clawback.

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