Principal Issues: 1. What is the process for individual condominium owners to claim the HRTC? 2. Will upgrading the condominium's siding qualify as an eligible expenditure for the HRTC?
Position: 1. Generally, supporting documentation may be in the form of a letter from the corporation and signed by an authorized individual and can include copies of agreements, invoices or receipts. The individual condominium owners can claim eligible expenditures for their unit and their share of eligible common area expenses. 2. Yes
Reasons: 2009 Budget statements; proposed section 118.04.
XXXXXXXXXX 2009-032665 George A. Robertson, CMA October 27, 2009
Dear XXXXXXXXXX :
This is in reply to your correspondence regarding the new home renovation tax credit (HRTC). In particular, you would like to know the process by which individual condominium unit owners can claim the HRTC and whether upgrading the condominium's siding would qualify as an eligible expenditure for the HRTC. We apologize for this delayed reply.
The proposed HRTC will provide individuals with a temporary 15% non-refundable income tax credit on eligible home renovation expenditures for work performed, or goods acquired, after January 27, 2009, and before February 1, 2010, for agreements entered into after January 27, 2009. 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.
The legislation regarding the new HRTC was introduced in the House of Commons on September 30, 2009, by the Honourable James M. Flaherty, Minister of Finance. The proposed legislation states that expenditures will qualify 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 will 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 the case of condominiums, the HRTC can be claimed for eligible expenditures incurred to renovate the unit that is the individual's eligible dwelling as well as the individual unit owner's share of the cost of eligible expenditures incurred for common areas of the condominium. Generally, the expenditures incurred for common areas are allocated to unit owners based on the governing documents of the condominium corporation. Based on the draft legislation, we are of the view that the condominium corporation can allocate the total cost of eligible expenditures incurred in respect of common areas to individual unit owners even if the expenditures are paid out of the condominium corporation's reserve fund.
The cost of upgrading the condominium's siding from aluminium to vinyl siding will qualify as an eligible expenditure for the HRTC.
To support a claim for renovations to individual units made by the condominium corporation's board of directors on behalf of the individual owners or to common areas of the condominium, owners will need documentation that identifies the amounts incurred for the renovation work from the corporation or the board of directors. For work performed on common areas, the documentation should clearly identify the individual condominium owner's portion of these expenses. Supporting documentation should include the name of the contractor and, if applicable, the goods and services tax/harmonized sales tax (GST/HST) registration number, a description of the work performed and the dates when the work or services were performed. Generally documentation may be in the form of a letter from the corporation and signed by an authorized individual and can include copies of agreements, invoices or receipts.
You can find more information on the HRTC on Canada Revenue Agency's Web site at www.cra.gc.ca/hrtc.
We trust that these comments will be of assistance.
Yours truly,
Nerill Thomas-Wilkinson
Acting Manager
for Acting Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch