Principal Issues: Can the HRTC be claimed on the costs associated with the installation of a new furnace, door, and doorframe for a rental home?
Position: No.
Reasons: Although the costs associated with the installation of a new furnace, door, and doorframe will generally qualify for the HRTC, renovation or alterations made to a property you own and use entirely for earning rental income are not eligible for the HRTC.
XXXXXXXXXX
Dear XXXXXXXXXX :
The office of the Right Honourable Stephen Harper, Prime Minister of Canada, forwarded to me a copy of your correspondence, which I received on October 29, 2009, regarding the new home renovation tax credit (HRTC).
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.
Although the costs associated with the purchase and installation of a new furnace, a door, and a doorframe will generally qualify as eligible expenditures for the HRTC, renovations or alterations made to a property you own and use entirely for earning rental income are not eligible for the HRTC.
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
William King
(905) 721-5194
2009-034627