Principal Issues: 1. If the work was not completed prior to February 1, 2010, can the individual unit owners of a strata claim the HRTC on their portion of the fees charged by the strata council?
2. Is the payment to contractor required to be made before February 1, 2010?
Position: 1. Individual unit owners can claim the HRTC on their share of qualifying expenditures incurred by the strata council. Expenditures incurred for services received or goods acquired after January 31, 2010, do not qualify for the HRTC. However, if part of the work was performed during the eligible period, the cost of that work will qualify for the HRTC.
2. No.
Reasons: 1. Pursuant to subsection 118.04(1), services must be received or goods must be acquired during the eligible period that begins on January 28, 2009 and ends on January 31, 2010 to qualify for the HRTC.
2. Section 118.04 does not require the payment to be made before February 1, 2010.
XXXXXXXXXX
Dear XXXXXXXXXX :
The office of the Honourable James M. Flaherty, Minister of Finance, forwarded to me a copy of your correspondence concerning the new home renovation tax credit (HRTC). I apologize for the delay in replying.
The legislation regarding the new HRTC has been enacted and is contained in section 118.04 of the Income Tax Act. The HRTC, only available for the 2009 tax year, provides individuals with a 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.
In particular, you want to know whether the individual unit owners of a strata can claim the HRTC on their portion of fees charged by the strata council for renovations that were not completed prior to February 1, 2010.
In the case of stratas, the HRTC can be claimed for qualifying expenditures incurred to renovate the unit that is the individual's eligible dwelling as well as for the individual unit owner's share of qualifying expenditures incurred by the strata council. The unit owner's share is not necessarily equal to the fees charged by the strata council. Generally, the qualifying expenditures incurred by the strata council are allocated to unit owners based on the governing documents or special resolutions of the strata council. Furthermore, the strata council should notify each unit owner, in writing, of their share of any qualifying expenditures.
Services must be received or goods must be acquired during the eligible period that begins on January 28, 2009, and ends on January 31, 2010, to qualify for the HRTC. Expenditures for services received or goods acquired after January 31, 2010, do not qualify for the HRTC regardless of when the contractor was paid. However, if part of the work was performed during the eligible period, the cost of that work will qualify for the HRTC even if the payment is made after January 31, 2010.
You can find more information on the HRTC on the Canada Revenue Agency Web site at www.cra.gc.ca/hrtc and in the Government of Canada brochure available at www.actionplan.gc.ca/grfx/docs/hrtc_eng. pdf.
I trust that the information I have provided is helpful.
Yours sincerely,
Keith Ashfield
Minister of National Revenue
Ananthy Mahendran
(905) 721-5204
2010-035735