Principal Issues: Are the costs of installing batteries for use in solar electrical systems eligible for the home renovation tax credit?
Position: If the repairs are part of routine repairs and maintenance, normally performed on an annual or more frequent basis, the costs will not qualify for the HRTC. If the costs are restorative and not normally performed on an annual or more frequent basis, they will qualify for the HRTC.
Reasons: The definition of "qualifying expenditure".
XXXXXXXXXX 2010-036408 Robert Dubis
September 29, 2010
Dear XXXXXXXXXX :
Re: Home Renovation Tax Credit
Thank you for your correspondence received on April 16, 2010, regarding the new home renovation tax credit (HRTC). You asked if the costs of purchasing batteries for use in your cottage's solar electrical system are eligible for the HRTC.
The legislation regarding the new HRTC has been enacted and is contained in section 118.04 of the Income Tax Act. The HRTC provides individuals with a temporary 15% non-refundable income tax credit on eligible home renovation expenditures for services received or goods acquired, after January 27, 2009, and before February 1, 2010. However, expenditures for services received or goods acquired under agreements entered into before January 28, 2009, do not qualify for the HRTC. Taxpayers can claim this credit for the 2009 tax year on eligible expenditures exceeding $1,000, but not more than $10,000, which will result in a non-refundable tax credit of up to $1,350.
Under section 118.04, expenditures qualify for the HRTC if they are directly attributable to a renovation or an alteration of an eligible dwelling, including land that forms part of the eligible dwelling, and if the renovation or alteration is of an enduring nature and is integral to the eligible dwelling. Such expenditures include the cost of labour and professional services, building materials, fixtures, equipment rentals, and permits.
An eligible dwelling is a housing unit located in Canada that is owned by the individual, at the time of the renovation, and ordinarily inhabited by the individual, his or her current or former spouse or current or former common-law partner, or his or her children at any time after January 27, 2009, and before February 1, 2010. Therefore, any housing unit that an individual owns and uses personally, including a home and a cottage, qualifies for the HRTC.
The determination of whether an expenditure will meet the above-mentioned criteria is a question of fact. If the batteries are purchased in conjunction with the installation of a new solar electrical system, the expenditure will qualify for the HRTC providing all other requirements are met (e.g. eligible dwelling). If the batteries are purchased as replacement batteries for an existing solar electrical system, they are in the nature of a repair. If the repairs are part of routine repairs and maintenance, normally performed on an annual or more frequent basis, the costs would not qualify for the HRTC. However, if the repair is restorative in nature and not normally performed on an annual or more frequent basis, the costs will qualify for the HRTC. Based on the information provided, it appears that the expenditure is not one which would be performed on an annual or more frequent basis and may qualify for the HRTC to the extent that the batteries cannot be used independently from the solar electrical system.
You can find more information on the HRTC on the Canada Revenue Agency's Web site at www.cra.gc.ca/hrtc.
We trust that the information provided is helpful.
Yours truly,
Lita Krantz, C.A.
Assistant Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy & Regulatory Affairs Branch