Principal Issues: If a homeowner performs the work, will the renovation or alteration qualify for the HRTC?
Position: Providing all other conditions are met, the costs of the renovation or alteration will qualify for the HRTC. The homeowner can do the work himself/herself; however, he/she cannot claim the value of his/her labour.
Reasons: Generally, under common law, a person cannot contract with oneself.
XXXXXXXXXX
Dear XXXXXXXXXX :
Thank you for your correspondence regarding the new home renovation tax credit
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.
If you do the work yourself, the expenditures will qualify if they meet the
above-mentioned criteria and are supported by acceptable documentation. Such expenditures would include the cost of building materials, fixtures, equipment rentals, and building plans and permits, but would not include the value of your 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 you, such as a spouse or brother, unless that person is registered for the goods and services tax/harmonized sales tax (GST/HST) under the Excise Tax Act.
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.
Sincerely,
Jean-Pierre Blackburn, P.C., M.P. Minister of National Revenue
George A. Robertson
(905) 721-5196
2009-034311