Open up any Canadian newspaper or magazine these days and you are sure to stumble across at least one advertisement promoting the new temporary Home Renovation Tax Credit (HRTC) announced in January's federal budget.
With summer soon upon us, and many contemplating renovation projects to their homes or cottages, it's a good time to revisit some of the finer aspects of the HRTC.
First the basics: For 2009 only, individuals can claim a 15% non-refundable tax credit for eligible expenditures made in respect of their homes. The credit applies to any expenditure above $1,000, up to $10,000. As a result, the value of this new federal credit is equal to a maximum of $1,350 ($10,000 -$1,000 X 15%). Only expenditures made after Jan. 27, 2009, and before Feb. 1, 2010, are eligible for the 2009 credit.
Most of the questions I've fielded to date on the new HRTC deal with which expenses qualify.
The Canada Revenue Agency says any expenditure that is "incurred in relation to a renovation or alteration ... provided that the renovation or alteration is of an enduring nature and is integral to the eligible dwelling" qualifies for the HRTC.
This would include the cost of labour and professional services, as well as building materials, fixtures, equipment rentals and permits.
Examples of non-qualifying expenses include the cost of routine repairs and maintenance that are generally done on annual (or more frequent) basis, as well as appliances, furniture, drapery or audiovisual electronics. And specifically excluded are interest expenses associated with financing a renovation.
Last month, the CRA was specifically asked by a taxpayer whether hot tubs would be eligible for the HRTC. The CRA responded that it depends on the type of hot tub you are buying. The "plug-and-play" type of hot tubs, which come ready to use with a cord connected (so do not require a permanent electrical connection), would not qualify for the HRTC. By contrast, the larger, heavier type of hot tubs that are permanently positioned and hard-wired to the electrical panel would qualify "as they appear to be enduring in nature and integral to the eligible dwelling."
Another taxpayer asked whether the cost of "window coverings" was eligible for the HRTC. In responding, the CRA reiterated the basic principle that items that are affixed to an eligible dwelling and cannot be moved without altering their value or usefulness, would generally be considered "integral to the dwelling" and would qualify for the HRTC. In short, "fixtures" are eligible.
The CRA concluded that any window coverings, such as blinds, shutters and shades, which are directly attached to the window frame and whose removal would alter the nature of the dwelling, qualifies for the HRTC, while draperies or curtains don't qualify.