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Friday, March 20, 2009

Home Renovation Tax Credits

The Federal Government revealed the Home Renovation Tax Credit in its budget on Jan. 27, 2009. If you are thinking that maybe you might be able to manage a couple of small jobs, now may be the time. After all, if you keep the renovation budget to $10,000, you'll get $1,350 back — a saving of 13.5 per cent.

What is covered?

The tax credit kicks in on expenditures over $1,000, and you won't get any tax relief for what you spend over $10,000. So your tax savings on a $20,000 job will still be $1,350 — or a saving of 6.75 per cent.

The variety of expenditures that qualify for the tax credit is wide. Among them:
• Renovating your kitchen, bathroom or basement.
• Painting your house.
• Installing new carpeting or flooring.
• Replacing your heating/air conditioning system.
• Upgrading the insulation in your home, resurfacing your driveway or replacing you lawn with new sod.
Just about any job that improves your home or cottage — or any combination of jobs that improves either or both — qualifies for the credit.

Buying furniture, a big-screen TV, cleaning your carpets, buying tools or performing regular maintenance on your home won't get you the tax credit.

The Home Renovation Tax Credit can be coupled with other government programs that put money back into your pocket when you renovate your home. For instance, making your home more energy-efficient can qualify you for grants of up to $5,000 under the ecoENERGY Retrofit Program. You will still be able to claim the Home Renovation Tax Credit so essentially you can "double dip"
The same applies for eligible expenditures that are claimed under the Medical Expense Tax Credit.

While doing the work yourself will give you the most bang for your buck, jobs that you pay a contractor to do also qualify. Expenses such as labour, building permits, equipment rentals, professional services and incidentals are also eligible.
Municipalities regulate building permits, so you should check with your local officials before you begin your job. If your renovation involves structural changes to your home, pumbing or electrical work, you will most likely need a permit.

One of the major goals of the program, which is expected to cost the government $3 billion, is to stimulate local economies. Most of the material you buy to fix up your home is likely made in Canada and sold at your local hardware store (although it's as likely to be a U.S.-owned big-box store as a Canadian-owned big-box outlet).

One tax credit per family Unlike the Home Buyers' Plan, where each spouse can withdraw up to $25,000 from their RRSP to put toward a down payment on a first house, the Home Renovation Tax Credit is limited to one credit per family. While you can make claims for work done at more than one residence you own, the maximum any family can get back is $1,350. But a family can share the credit.
You'll be able to claim the credit on your return for the 2009 tax year. All material has to be purchased and work has to be finished no later than Feb. 1, 2010.

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