Principal Issues: Does the purchase of a computer system [hardware and software] connected to a security system qualify as an eligible expenditure for the HRTC?
Position: No
Reasons: The purchase of a computer system [hardware & software] as described is not a qualifying expenditure for the HRTC because a computer system is not considered to be a renovation or alteration of an eligible dwelling that is integral to the dwelling or enduring in nature.
XXXXXXXXXX 2010-035602 George A. Robertson, CMA March 12, 2010
Dear XXXXXXXXXX :
We are writing in response to your correspondence dated January 27, 2010, regarding the new home renovation tax credit (HRTC) wherein you asked if the purchase and installation of a computer system, including hardware and software, that is connected to a security system would qualify for the HRTC.
The legislation regarding the new HRTC is contained in section 118.04 of the Income Tax Act. The HRTC provides individuals with a temporary 15% non-refundable income tax credit on eligible home renovation expenditures for services received or goods acquired, after January 27, 2009, and before February 1, 2010. However, expenditures for services received or goods acquired under agreements entered into before January 28, 2009, do not qualify for the HRTC. 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.
Under section 118.04, expenditures qualify for the HRTC 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. The installation of a computer system is not considered to be a renovation or an alteration of an eligible dwelling that is enduring in nature and integral to the eligible dwelling. In addition, paragraph 118.04(1)(c) of the definition of qualifying expenditure excludes an outlay to acquire a property that can be used independently of the qualifying renovation. You have stated that the computer system is being used to collect and archive data such as records of maintenance on the condominium's equipment. In our view the computer system is being used independently of any qualifying renovation that the condominium may have made.
Therefore, the costs of the computer system, as described by you, are not qualifying expenditures for the HRTC.
You can find more information on the HRTC on the CRA Web site at www.cra.gc.ca/hrtc.
We trust our comments will be of assistance to you.
Yours truly,
Nerill Thomas-Wilkinson
Acting Manager
for Acting Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch