As part of the Government of Canada's economic action plan, Canadian home owners will be able to claim a home renovation tax credit ("HRTC") for a portion of the costs associated with renovations to their freehold homes, condominium units and the common elements of condominium corporations.
By way of background, the program provides a 15% non-refundable income tax credit on eligible expenses incurred to renovate eligible dwellings. An expense is eligible if it is incurred in relation to a renovation or alteration of an "eligible dwelling".
Examples of eligible expenses include, among others:
- renovating a kitchen, bathroom, or basement;
- new windows, doors, or flooring;
- building an addition, garage, deck, shed, or fence;
- a new furnace, woodstove, fireplace, water softener, or water heater;
- a new driveway or resurfacing a driveway, re-shingling a roof or painting of a house;
- landscaping – new sod, perennial shrubs and flowers, trees, etc.;
- swimming pools (permanent – in-ground and above-ground);
- fixtures – blinds, shades, shutters, awnings, lights, fans, etc.; and,
- associated costs such as permits, professional services, equipment rentals, and incidental expenses
Examples of ineligible expenses include, among others:
- furniture, appliances, tools, and audio and visual electronics;
- routine repairs, maintenance and cleaning (e.g., furnace cleaning, snow removal, lawn care, pool cleaning, house cleaning); and,
- financing costs.
An "eligible dwelling" must be occupied as a principal residence by the owner, or a family member of the owner, between January 27, 2009 and February 1, 2010. Further, the work performed or goods acquired must be performed or acquired, as the case may be, after January 27, 2009, but before February 1, 2010.
The credit applies to expenditures in excess of $1,000.00, but not more than $10,000.00. Accordingly, the maximum credit available is $1,350.00 ($9,000.00 x 15%).
With respect to common element renovations, the cost of all qualifying common element renovations is multiplied by a unit owner's percentage interest in the common elements. This product, to a maximum of $9,000.00, is then multiplied by 15% to ascertain the credit a unit owner is entitled to claim. On the administrative side, boards and property managers will soon have to create a detailed list outlining the costs incurred by the condominium corporation in relation to all qualifying common element renovations. Further, as with renovations to freehold homes and condominium units, all required supporting documentation outlined on the Canada Revenue Agency's website must be retained by the condominium corporation. This list and supporting documentation, together with schedule "D" to the condominium corporation's declaration, should be delivered to unit owners in February or March of 2010. The key is to provide unit owners with the required information after February 1, 2010, so all qualifying expenditures are included, but well in advance of the April 30, 2010 income tax filing deadline.
In early February, boards should consider consulting an auditor to review the list of costs and supporting documentation to ensure compliance with the requirements of the HRTC program. In cases where it is not clear whether a particular renovation qualifies for HRTC, boards may wish to consult legal counsel for an opinion.
For further information on the HRTC program, please visit the Canada Revenue Agency’s website at www.cra-arc.gc.ca/hrtc.