The Home Renovation Tax Credit – Canada
The home renovation tax credit – A great way to save on tax if you have planned on a home renovation, now may be the time.
This is a tax credit which means that you receive a 15% tax credit for expenses greater than $1000. To qualify for the maximum $1350 tax credit you must spend at least $10,000 of which $9000 is eligible for the tax credit ($9000 x 15% = $1350). This is a temporary tax credit and home improvements must be completed between Jan 27 2009 and Jan 31 2010. Expenditures made in Jan 2010 must be claimed on the 2009 tax return.
Amounts above $10,000 are not eligible for the tax credit, but depending on your marginal tax rate the home renovation tax credit may be a better alternative than other tax saving measures. For example at a 30% marginal tax rate you would need to contribute approximately $4,500 to your RRSP to generate a tax refund equal to the maximum credit available for the home renovation tax credit.
The renovations must be made to a personal use property such as a home, cottage, or condominium. The types of home renovations that qualify, generally must be of an enduring nature and integral to the dwelling. The expenditures include building materials, labour, equipment rentals, and the cost of permits. Examples given by revenue Canada include Renovating a kitchen or bathroom, new flooring, decks, retaining walls, a new furnace, water heater, or painting the exterior or interior of the house. Expenditures that cannot be claimed include normal repairs, carpet cleaning, furniture or appliances, financing costs, or tools that retain a value after the renovation.
If you are condo owner you might be eligible for the credit even if you don’t spend any money on your unit. The share you have in spending on improvements to the common areas of the condo also qualify for the 15% credit. Ask your condo manager to find out if this applies to you.
The credit is also limited to one per family, which includes the tax payer’s spouse or common -law partner and any children under the age of 18 throughout the year. If the taxpayer who claims the credit cannot fully utilize it the unused portion may be transferred to one or more of the other family members.
To further increase the amount of government subsidies that you could receive, determine if the renovations are eligible for the eco-energy retrofit-homes grant. Grants of up to $5,000 are available to offset the cost of making energy efficient home improvements such as adding insulation, and replacing windows and doors. If you are considering a new energy efficient furnace or heat pump, the home renovation tax credit, and eco-energy grant could result in a big saving.
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Home Renovation Tax Credit FAQ:
Question: Am I eligible for the Canadian home renovation tax credit?
I rent my home and I want to replace the carpet but I don’t know if I’m eligable because I don’t own my home.
Answer: The credit is only for work done to property you own.
Question: How come us Americans can’t have a “home renovation tax credit” like Canadians?
I am currently looking to refurnish my abode. I decided to see if the ikea site in canada had different furnishing. To my amazement, they said you can get a tax credit for buying the stuff for renovating your home!
Now, why can’t our politicians give us deals like that!?
Answer: Under Obama’s stimulus bill, you can get a credit of up to $1500 for energy efficient remodeling.
Sometimes you can get local tax break on your property taxes if you remodel and increase the value of your house. It all depends on where you live.
Question: What do I have to keep/show for Home Renovation Credit for my taxes?
I’m reno-ing a basement and know that this qualifies for the Home Renovation Tax Credit. I’m just wondering what do I have to keep so that I’m not scrambling next tax season.
Answer: Other than keeping all your receipts for your renovations, make sure that the people that are doing work for you, have a GST number or their work won’t qualify for your tax credit. The auditors will really look at all the expenses, so make sure you have qualified people.
Question: Home Renovation Tax Credit Question?
Are these expenses eligible for the HRTC?
1) Adding insulation to a house
2) Repairing crack in the foundation and replacing the drywall around it.
Both were done by a contractor. Thanks!
Answer: Yes, basically if the renovation is permanent it is eligible. Here are examples of eligible and ineligible expenditures:
Eligible
• Renovating a kitchen, bathroom or basement
• New carpet or hardwood floors
• Building an addition, deck, fence or retaining wall
• A new furnace or water heater
• Painting the interior or exterior of a house
• Resurfacing a driveway
• Laying new sod
Ineligible
• Furniture and appliances (e.g., refrigerator, stove, couch)
• Purchase of tools
• Carpet cleaning
• Maintenance contracts (e.g., furnace cleaning, snow
removal, lawn care, pool cleaning)
Question: Canada Home Reno Tax Credit – what do you really get back?
I have been reading and searching for info on the Canada Home Renovation Tax Credit (HRTC) and cannot find an answer to my question.
Tax credits usually work by applying against your income. IE: If you made $40,000 and you put $1350 into your RRSP you get the income tax paid on $1350 back, in other words a $400 tax return. In the case of the HRTC, if you made $40,000 this year and you spent the full $10,000 on renovations the government says you get a tax credit of $1350.
So, the question is: Does that mean you get a tax return of $1350, or does the $1350 apply against your taxable income and you get $400 (or some percentage) back?
Answer: The tax credit is 15% of the amount paid for renovations (up to $9000, for a maximum tax credit of $1350). A little background information: The HRTC is a non refundable tax credit. The implementation of non refundable credits is designed so that all taxpayers get the same benefit, no matter the income. The way that’s done is that, instead of reducing INCOME, they just generate a fixed credit on TAXES, based on the lowest tax bracket (15%).
Thus, the $9000 of spending (the credit applies for expenses between $1000 and $10000) results in $9000 x 15%= $1350.
Question: Is the tax credit for home renovations for each household or each person?
Answer: Home renovations can only be used for the person that has PAID for them on the home regardless who is on the deed to the home. The tax credit can only be used ONCE for each household.
Question: Does getting your drive way paved count for the home renovation tax credit?
I want to get my drive way paved and want to know if that counts for a tax credit refund of up to $1300 in Ontario?
Answer: Yes it does.
Question: What percentage of renovations cost qualify for the HRTC?
I am planning some home reno’s and want to know what percentage of the reno expenses qualify for the new Home Renovation Tax Credit.
Answer: The base of the HRTC is 15% of the renovation expense, on expenses up to $10,000. The first $1,000 is a base and does not receive a credit.
For example:
Renovation Cost $7000
Base amount -$1000
Eligible Expense $6000
HRTC $900
Since the maximum eligible amount is $10,000 the maximum credit you can get is $1350 (15% of $9000)