Principal Issues: Do expenditures for 'do it for me' and 'do it yourself' projects qualify for the home renovation tax credit (HRTC)?
Position: Yes the expenditures qualify for the HRTC, provided all other conditions are met. However, qualifying expenditures would not include the value of the homeowner's labour.
Reasons: Expenditures for work performed, or goods acquired, after January 27, 2009, and before February 1, 2010, for agreements entered into after January 27, 2009, 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.
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Dear XXXXXXXXXX :
The office of the Right Honourable Stephen Harper, Prime Minister of Canada, forwarded to me a copy of your correspondence concerning the new home renovation tax credit (HRTC). You asked whether expenditures for "do it for me" and do-it-yourself projects qualify for the HRTC. Please accept my apology 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.
The expenditures for a contractor, who does "do it for me" projects, or a homeowner, who does do-it-yourself projects, will qualify provided they are eligible expenditures and are supported by acceptable documentation as outlined on the Canada Revenue Agency (CRA) Web site at www.cra.gc.ca/hrtc. However, qualifying expenditures would not include the value of the homeowner's labour.
Also, expenditures will not be eligible if the related goods or services are provided by a person not dealing at arm's length with the individual, such as a brother-in-law, unless that person is registered for the goods and services tax/harmonized sales tax under the Excise Tax Act.
You can find more information on the HRTC on the CRA Web site noted above and in the Government of Canada brochure available at www.actionplan.gc.ca/grfx/docs/hrtc_eng.pdf. I am enclosing a copy of the brochure for your reference.
I trust that the information I have provided is helpful.
Sincerely,
Jean-Pierre Blackburn, P.C., M.P.
Enclosure
Nancy Shea-Farrow
(905) 721-5226
2009-031173