Did You Renovate Your Home Last Year?

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If you renovated your home after January 28, 2009 and before February 1, 2010, you may be eligible to claim the Home Renovation Tax Credit (HRTC) on your 2009 income tax return.

Eligibility Requirements

The HRTC is family based. This means that the credit can be split among family members (i.e. you and your spouse), but the total amount claimed cannot exceed the maximum allowable amount. If two separate families share ownership of an eligible dwelling, each family can claim its own credit for its expenses related to that dwelling.

An eligible dwelling is a housing unit located in Canada that you own at the time of the renovation. You must own either the housing unit or the capital stock of a co-operative housing corporation you acquired for the purposes of obtaining the right to inhabit that housing unit. You, your spouse or common-law partner or your children must have lived in the house during the eligible period. An eligible dwelling includes the land on which the housing unit is located, to a maximum of 1.24 acres.

If you sold one eligible dwelling and purchased another during the relevant period, you can claim renovations on both dwellings, but the maximum you can claim for both dwellings is $10,000.

Generally dwellings that are used to generate income are not eligible for the HRTC. For example, if you own a cottage which you use to generate income, renovations to that dwelling are not eligible. However, if the cottage is ordinarily inhabited by you, your spouse or common-law partner, or children at any time during the eligible period, it will be eligible for the HRTC.

Eligible Expenses

Eligible expenses are incurred by renovating or altering an eligible dwelling. There are a number of expenses that may be considered eligible, for example, kitchen renovations, windows and doors, new flooring and central air conditioners.

To be an eligible expense, the general rule is that the item must become a permanent part of your eligible dwelling. For example, blinds may be an eligible expense if they are directly attached to the window frame and if removed would alter the nature of the dwelling. However, if the blinds can be removed and installed in another dwelling, they would not likely qualify as an eligible expense.

Some ineligible expenses include furniture, tools, carpet or house cleaning, maintenance contracts (i.e. snow removal, lawn care, etc.) and financing costs.

Labour Expenses

If you do the work yourself, you cannot claim labour expenses. Generally, work completed by electricians, plumbers, and carpenters qualifies for the HRTC. Family members hired to do the work do not qualify for the HRTC, unless that person is registered for the Goods and Services Tax/Harmonized Sales Tax under the Excise Tax Act and all the other criteria are met.

Calculating the HRTC

The HRTC applies to renovations costing more than $1,000 but not more than $10,000. There is no credit for the first $1,000. The maximum credit is calculated as follows: [($10,000 - $1,000) x 15%] = $1,350. So, for example, if your renovation costs equal $5,000, your credit will be [($5,000 - $1,000) x 15%] = $600. Because this is a tax credit, this means that the taxpayer will pay $600 less in taxes in the above example.

Remember that you must keep your receipts in case you are asked to verify your expenses! For more information visit the CRA website at http://www.cra-arc.gc.ca/tx/ndvdls/sgmnts/hmwnr/hrtc/menu-eng.html.