Life Can Be Taxing  

Show me the money!

As a home owner the government of Canada may have a $1,350 cheque with your name on it. If you renovate your home before the end of this month, or did so in 2009, you may be eligible for the Home Renovation Tax Credit. Introduced as a temporary measure to help stimulate a floundering Canadian economy, the Home Renovation Tax Credit is like getting 15% off your home renovation project. Well not quite.

The Home Renovation Tax Credit is a credit against taxes payable equal to 15% of qualifying expenditures over $1,000 and up to $10,000 made after January 27, 2009 and before February 1, 2010. That works out to a maximum credit of $1,350. For example if you spent $5,000 on materials and labor to have hardwood floors installed in your home you would receive a credit against your taxes otherwise payable of $600. Simple right? Unfortunately tax law is never simple. Here are a few things to consider.

The credit is available on qualifying expenditures paid after January 27, 2009 and before February 1, 2010. That means amounts paid in January 2010 will be applied against 2009 taxes otherwise payable and not 2010 taxes payable.

The credit applies to materials purchased during the qualifying period even if they are not installed until after the qualifying period ends.

Only amounts paid for work performed during the qualifying period will qualify. The payment itself can be can be made after the qualifying period and still qualify.

The credit is non-refundable. This means that if you would not otherwise have to pay tax because your income is sufficiently low then you will not receive a credit in relation to your qualifying expenses.

You must spend more than $1,000 before the credit kicks in. If you have not spent more than $1,000 you will not receive a credit.

So what kinds of expenditures qualify? In general, items of an enduring nature will qualify. Those items that will not become a permanent part of your home will not qualify. Qualifying expenses include most renovations, windows, doors, new flooring, new heating and cooling systems, interior and exterior paint, permanent hot tubs, pool liners, new sod, trees, plants and other gardening material, costs associated with installation, and much more. Ineligible expenses include furniture, household appliances, tools, maintenance costs, financing costs, and expenses incurred in relation to the rental or business portion of a home to name a few.

Only those qualifying expenses paid in relation to an eligible dwelling qualify. So what is an eligible dwelling? In general an eligible dwelling means a house in which you and or your spouse own and normally reside in. The home must be located in Canada and can include a vacation home in many cases. Also consider that your share of the cost of expenses for common area renovations of a condominium may qualify under certain circumstances. Expenses you incurred as a tenant to paint the apartment you are renting will not qualify.

One final thing to remember is keep your receipts. Although they do not need to be submitted with your tax return, you will need to substantiate your claim if asked. For more information visit the Canada Revenue Agency’s website at www.cra-arc.gc.ca.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

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About the Author

Andrew Pitre is a Chartered Accountant with K. Hecht & Associates Inc. Andrew specializes in the area of accounting and tax for individuals and owner managed businesses. His areas of practice include year-end notice to reader and review engagement reports and associated corporate tax filings. In addition, Andrew's practice includes tax planning for individuals, corporations, and trusts.

Andrew graduated from the University of Victoria in 2005 with a degree in Economics. In 2005 he began his career in public accounting and in 2008 he obtained his Chartered Accountant designation. In 2010 Andrew completed the Canadian Institute of Chartered Accountants In-Depth Tax Course.

Andrew's interests include most water sports, snowboarding, squash, and hiking. He is the current President of the Kelowna CA association and treasurer of the West Kelowna Daybreak Rotary club.

Andrew can be reached at [email protected] or www.hecht.ca.

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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