Principal Issues: (a) Whether otherwise eligible expenditures will qualify for the home renovation tax credit (HRTC) when the homeowner performs the renovation work himself/herself. (b) How will a homeowner claim the home renovation tax credit (HRTC).
Position: (a) Providing all other conditions are met, the costs of the renovations or alterations will qualify for the HRTC. The homeowner can do the work himself/herself; however, he/she cannot claim the value of his/her labour or any tools purchased to perform the work. (b) A new schedule will be included in the 2009 income tax and benefit return to calculate the amount to be included on Schedule 1.
Reasons: To be eligible for the HRTC, expenditures incurred in relation to a renovation or alteration to an eligible dwelling (or the land that forms part of the eligible dwelling) must be of an enduring nature and integral to the dwelling. Generally, under common law, a person cannot contract with oneself.
Signed November 12, 2009
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 August 6, 2009, concerning 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, which was introduced in the federal budget tabled on January 27, 2009, has not yet been made law. However, the draft legislation publicly released on September 14, 2009, 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.
Providing the above conditions are met, the costs of renovating your kitchen, bedrooms, and basement will qualify for the HRTC. You can do the renovation yourself; however, you cannot claim the value of your labour or the cost of any tools you may have purchased. Your HRTC will be based on your total eligible expenditures.
A new schedule will be included in your 2009 income tax and benefit return that will allow you to list your eligible expenditures and calculate the amount to enter on a new line on Schedule 1. The HRTC will only reduce your federal income tax payable. If your non-refundable credits, including the HRTC, total more than your federal income tax, the Canada Revenue Agency (CRA) will not refund the excess as a rebate.
You can find more information on the HRTC on the CRA Web site at www.cra.gc.ca/hrtc and in the enclosed Government of Canada brochure, which is also available at www.actionplan.gc.ca/grfx/docs/HRTC_eng.pdf.
I trust that the information provided is helpful.
Sincerely,
Jean-Pierre Blackburn, P.C., M.P.
Enclosure
William King
(905) 721-5205
2009-033628