Principal Issues: Is an expenditure for a new furnace purchased from a contractor on December 1, 2009, for $5,000, and financed over the next five years, eligible for the HRTC ?
Position: An expenditure for a new furnace that is installed in an eligible dwelling before February 1, 2010, will qualify for the HRTC, however, no part of the financing costs associated with the purchase of the new furnace qualifies for the HRTC.
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 Honourable James M. Flaherty, Minister of Finance, forwarded to me a copy of your correspondence regarding the new home renovation tax credit (HRTC).
I also received your subsequent correspondence on August 14, 2009. You asked whether an expenditure for a new furnace purchased from a contractor on December 1, 2009, for $5,000, and financed over the next five years, is eligible for the HRTC on a 2009 income tax and benefit return. Please accept my apology for this delayed response.
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 Mr. Flaherty. 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 scenario you mentioned, the contractor is paid in full by the financing corporation and the customer becomes indebted to the financing corporation. Provided the above conditions are met, the expenditure for a new furnace that is installed in an eligible dwelling will qualify for the HRTC. However, acceptable documentation must be available on request to support that the purchase has been made or incurred, and no part of the financing costs associated with the purchase of the new furnace qualifies for the HRTC.
You can find more information on the HRTC, including guidelines for acceptable supporting documentation, 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.
Sincerely,
Jean-Pierre Blackburn, P.C., M.P.
Minister of National Revenue
Nancy Shea-Farrow
(905) 721-5226
2009-033126