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With just hours to go before the home renovation tax credit (HRTC) expires, you still have time to rush out and purchase those supplies before the Jan. 31 midnight deadline. Here are some last-minute tips and tricks:
How does it work? The HRTC is a 15% non-refundable tax credit for "eligible" renovation expenditures made to your home or vacation property. The credit applies to any amounts spent over $1,000, up to a maximum of $10,000, producing a maximum credit of $1,350.
What qualifies? The expenses are eligible if they are incurred in relation to a renovation or alteration to your home or vacation property, and are of an enduring nature and integral to the dwelling. As a general rule, if the item you purchase won't become a permanent part of your home, it's not eligible.
To date, the Canada Revenue Agency has responded to nearly 300 formal technical interpretations on what qualifies for the HRTC. It has provided an extensive list on its website, which includes less-obvious renovation expenses, such as permanent reverse-osmosis systems, permanent swimming pools and hot tubs, pool liners, perennial shrubs and flowers, trees, large rocks, permanent garden lighting, permanent water fountains, ponds and large garden ornaments.
Window coverings are unique. Whether the costs qualify may depend on their permanency. According to the CRA, blinds, shutters and shades that are directly attached to the window frame and whose removal "would alter the nature of the dwelling" will generally qualify for the HRTC. Even removable draperies and curtains may qualify for the HRTC "if they would not keep their value or usefulness if installed in another dwelling."
What doesn't qualify? The CRA has also provided a list of ineligible expenses, which includes furniture, household appliances, electronic home-entertainment devices, tools, carpets, house cleaning, furnace cleaning, snow removal, lawn care and pool cleaning.
How hard is this Jan. 31 deadline? Eligible expenses for renovation supplies, such as lumber, flooring, etc., that are purchased before midnight on Jan. 31 will qualify, even if they are installed after January 2010. CRA spokesman Philippe Brideau says the supplies must be physically delivered by the deadline to qualify for the HRTC.
The same, however, does not hold true for labour. If qualifying renovation work is performed by a contractor or a third party, and the work is not completed by the deadline, only the portion that is completed before Feb. 1 qualifies - even if you prepaid.
What about condo owners? If you own a condo, you can claim the HRTC for qualifying renovations made on your own unit, as well as for your share of renovations of the common areas made by the condo corporation.
Perhaps the biggest challenge for condo boards and management companies is dealing with owners who have sold their condos at some point during 2009. John Oakes, chief executive of Brookfield Residential Services Ltd., said that Brookfield's current plans are to provide a list of HRTC-eligible expenses to each property manager and corporation it manages. That list will show the name of the contractor, the invoice number, the date the invoice was paid and a brief description of the expense. This list, together with a receipt for an owner's proportionate share, will be sent to each existing condo owner some time in late February.
Any previous owner will have a right to obtain a copy of the list from the management office and from that list should be able to calculate what portion of expenses were incurred during that previous owner's tenure. "The real difficulty is that a lot of work was in progress during any sale of a unit. It was impossible to get from every contractor how much work was actually completed up to the day any unit was sold," Mr. Oakes says.
What if I rent out or use part of my home for business use? If you rent out your basement or earn business income from one of the rooms of your home, you can only claim the HRTC for expenses incurred for the personal-use areas of your dwelling. For renovation expenses for common areas that benefit the housing unit as a whole, such as a new roof or heating system, you are required to allocate the expense between personal and income-earning use and claim only the personal-use portion.
How do I submit my claim? The CRA has published Schedule 12 as part of the 2009 income tax package. On the schedule, you indicate the date on the invoice, the name and GST number of the supplier, a description of the supplies purchased or work done, and the amount paid. You don't need to send in your receipts, but keep them in case the CRA asks to see them later.