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moneysense.ca, 8/02/09
The Home Renovation Tax Credit (HRTC)
A further concern is that you need receipts to claim the tax credit. With many contractors working on a cash basis, it is possible that the tax credit would be reduced by a higher renovation bill. Still, this year you may want to keep every Home Depot and Rona receipt in a separate file so that claiming the credit becomes easier at tax time. The relevant portion of the budget that deals with the HRTC can be found here.
moneysense.ca, 8/02/09
What if I do the installation/construction myself? I assume a receipt for drywall, nails and paint from the hardware store would be eligible? I’d get the most bang for my buck doing the work myself, but I think the economic stimulus of DIY is minimal. Oh well, tax credits are welcome no matter where they come from.
I think that the HRTC is a great option for my personal situation, since I’ll be buying my first home soon and likely making a few changes as soon as I move in. However, I agree that encouraging debt-laden canadians to spend even more money is a poor long-term economic strategy.
Good summary CC,
If I purchase a home this year this is something I’ll definitely take advantage of as well as the new home buyer credit. It does seem like “over-spending” is something that will be continued in a housing market that still appears hot, but if you’re an individual in good financial position than why not take advantage of it
?
One constraint that is implied, but not stated, is that the HRTC amount cannot exceed your taxable income. I don’t see how those families affected by the rising tide of unemployment will take advantage of the HRTC.
Most building materials are Cdn made so a DIYer will flow money to forestry guys and drywall manufacturers. Also remember that for the DIYer, you cannot claim tool purchases. Most of us have all the basics (plus some) but if you need some specialty item (e.g. PEX crimper) it might be better to rent it.
I think this is a useless tax credit. If they wanted to make a difference to the average working joe they should make mortgage interest tax deductible for a year or two. That is money we were going to be spending anyway. Telling us to go into debt during this so called credit crunch and while our jobs may be at risk , while the banks are raising interest rates on lines of credit seems insane to me. Of course what elese would you expect from politicians?
@Dave from GP – so given that the credit is intended to *stimulate* spending, you think it’s a good idea to give tax credits for money that was going to be spent anyway?
I don’t any mention within the Budget that the government is asking people to go into debt, but it may leverage money that would have been saved. As Nurseb911 said, if you’re in a good financial position, why not take advantage of it?
As an aside, the US would take back mortgage-interest deductibility if it could. There’s a good argument to be made that it exacerbated the housing bubble south of the border, and, realistically, it would simply inflate the value of existing homes.
Al R
The Home Reno Tax Credit will only help the Government and contractors… Why? Because the renovation business has always been a black market – mostly everyone pays cash and saves at minimum the tax and usually more for labour and for materials more often than not… (one exception would be big box stores like Home Depot that purchase using PO#’s etc…)
The government wins because now people (customers) will demand receipts thereby forcing contractors to declare this income – and when contractors or forced to declare income the price goes up… no savings passed onto the consumer – none! zilch! zero! nada!
The contractors also win because they raise the price due to higher demand…
A sneaky move by the GoC if you ask me – no thanks – I’ll continue to pay cash for home renos and save more…
I agree with Dave from GP that is is a useless tax credit. A better tax credit would be a long term credit for improving energy efficiency in housing or making changes that improve the environment foot-print of you house, like low flow toilets.
I know that there is a program of getting your house green audited but that program is rather limited and requires the home owner to the changes within one year. I think they could probably improved this program with either a longer term to get the changes done or have defined improvements which do not need to be audited.
As for allowing to deduct our mortgage interest off our taxes, that sounds good but it is terrible policy. That is the main reason why the US is in such troubles right now.
Stephen;
the ecoEnergy program is the one you are talking about. I don’t think it has the best take-up right now. I assume that’s due to the fact that you have to pay $300 some dollars for the energy audit by a home inspector. If they made that free, then I suspect the program would be a lot more popular.
the ecoEnergy rebate is good for 18 months from the first audit, not 12.
I agree, allowing tax deductability on mortgage interest would not help matters and would make things worse.
I would imagine that an individual’s stance on this tax credit has a direct relationship with whether or not they are planning to take advantage of it.
Cash Canuck: My assumption is that most hardware store expenses will be eligible. That’s why I’m keeping all my Home Depot / Rona receipts.
Brad: Absolutely! We just replaced most of our windows in November, so I’m kicking myself for missing the tax credit. I’ll definitely be taking advantage of the credit for expenses I’d have incurred anyway: replacing the remaining windows, installing a new water heater etc.
Dave: I think it would be unwise to go out and spend a bunch of money just to take advantage of this credit. Having said that, responsible spenders might want to advance some spending planned for future years (without going into extra debt) to take advantage of the credit.
Al R: Mortgage interest deductibility would not be a good idea, IMO as well. I think home prices will inflate a bit more as affordability increases. Besides, the Government might take away capital gains exemption for personal residences to pay for deductibility.
Loki: I agree to an extent this is true. But for major jobs such as replacing the roof, windows, installing a furnace etc. I’ve always received receipts. I agree that “cash-only” contractors are going to jack up their prices for providing a receipt.
Stephen: Like I mentioned in the post, I don’t know how this massive program is economically sound. But I suppose the Government must make it appear that it is doing something about the recession. Also, like nobleea mentions, you are talking about the ecoREBATE program. I forgot to mention that you are allowed to double dip to get the HRTC as well as the ecoREBATE.
Thanks for the summary – its nice to get a credit and we’ll probably take advantage of it but it doesn’t alter my spending habits nor induce me to go out and spend more. The reality is the only reason we would qualify is the kitchen was slated for updating this summer either way.
Seems like a bit of a weak stimulus approach to me.
As a contractor I am obviously happy with the credit. I don’t expect it to be a huge windfall, but it may encourage some of my clients who were undecided about spending this year.
I am registered and insured. Many, many contractors are not. Unfortunately, anyone with a hammer can call themselves a contractor. These are the ones that demand cash, don’t have a address, website, etc… If these are the people that you worry will inflate their prices to provide a receipt, then you have bigger problems. For one, why are you considering hiring such a person in the first place?
And if these so called contractors have to raise there prices and become registered businesses who pay there taxes, so much the better for me. Now they will be on a level playing field, and they won’t like that much, lol! Let’s see…Got insurance? Got references? Got a website? Do you have all your teeth? Gee, your one selling point, price, just went away. Now what bozo?
My guess is those under the table contractors won’t step up, because they are afraid to, or are unable to.
And if they do, they can finally pay taxes like the rest of us.
I actually don’t think this is a very great program and more likely to encourage debt than help the economy.
That said, I do plan to max it out. I will be buying a house soon and if there is a unfinished basement, garage, yard, etc. then I might as well do it within the year and get the credit. I’ll be able to pay for it with the savings from buying a house with, for example, an unfinished basement.
While going into debt for this is not a great idea, at 4% you could borrow the money for 6 years, pay $156 a month, and pay less interest than the tax credit you receive. Even better if you then apply that credit back to the loan to reduce the principal.
we have to get our roof done this year… does that count?
Didi: I believe getting your roof done would qualify for the credit. Be sure to get receipts.
I believe roof repairs do not count actually. I don’t fully understand the rationale, but I was speaking with someone that’s familiar with these things and she was adamant that it was not eligible. Something to do with roof repairs qualifying as maintenance and not upgrades/renos.
I believe she may have been involved in drafting some government policy in the past, so I trust she knew what she was talking about.
How about replacing the old roof with a new roof? If resurfacing driveway is eligible, I cannot see why a new roof is not.
The Reverend: It’s possible that repairs to the roof (saying replacing a few damaged shingles) would be considered “routine maintenance”. But I think replacing the entire roof qualifies under “renovations and alterations to a dwelling or the land on which it sits that are enduring in nature”.
kitty: See my response above. Note that I’m not an expert in these things and I’m going by my impression of what the budget document states.
For me, the tax credit is barely (since the max benefit is only 13.5% after the $1000 deductible is taken into account) enough to make me decide to go ahead with repaving my driveway, something that needs to be done but could wait till next year. Still that could be deferred if the market tanks again from here to April.
Stephen wrote—-A better tax credit would be a long term credit for improving energy efficiency in housing or making changes that improve the environment foot-print of you house, like low flow toilets.
The City of Ottawa has a soon to end rebate program where they will rebate up to $75 for replacing an old toilet with a new low-flow one.
My condo mangement has decided to replace one old flow toilet, with the one low-flow one this spring, in each townhouse, at the condo corps expense—–it is expected that payback in reduced water costs is two years.
The condo will take advantage of a volume purchase as well as the City of Ottawa rebate.
this is why I rarely vote conservative….they seem to love to support there Tim Horton suburbanite…for whom this measly tax credit is directed….
To spend $10,000 on redoing your kitchen means you are already doing ok….what about the lower middle-class where are there tax breaks…don’t want to make this politcal…so sorry about that…just do not like this tax gimmick….
Thanks for replying and for all the info… it makes sense that general repairs to a roof might not qualify since that would fall under general maintenance whereas the replacement of a roof would. I have to get the roof done and renovate a bathroom this year anyways so I’ll keep all my receipts and go from there.
Kind of good timing for me…
We plan to have a new A/C installed this spring and the backyard done in the summer so we will take advantage of this. From my research, it seems A/C falls along the line of heating and cooling system and should qualify for the credit.
Since this is a non-refundable tax credit, will there be any benefit for those of us who routinely get money back at tax time? I was planning on tossing a large lump sum into RRSP’s, so I will probably be getting like $3k back. I also was planning on redoing the roof this year to the tune of about $6k.
Braiden Harvey says ” Thanks for the summary” What if you own more than one home in Canada?”
Braiden Harvey
Braiden Harvey
winnipegkevin, I think you may be misunderstanding how taxes work when you file your tax forms after the year end. Unless your amount of tax paid is actually negative, which is highly unlikely if you have a job, then this would benefit you.
By Non-Refundable Tax Credit, they mean that it will not make the amount of taxes you pay go negative under any circumstance.
If you are getting a tax refund each year this is because you have already paid too much tax throughout the year, much like getting change back when you buy an item at a store. If you walk in to a Tim Hortons and buy a coffee for 2 bucks, you pay with a 20, and they give you 18 bucks back as change you don’t consider that a refund do you?
The same transaction is happening when you file your taxes. Throughout the year taxes are paid from your pay check, at the end of the year you file forms that say how much you made as income and how much tax you’ve already paid off of your pay check. Then those forms calculate how much you should have paid as tax. If these two numbers are different then ‘change’ is made in either direction by either you owing the government money or the government owing you money. Just because you get money back from this final transaction has no bearing on if you’ve paid taxes or not.
Thanks Trac for the answer. Clearly I am misunderstanding how it works. I thought a non-refundable tax credit could lower what you owed only if you actually owed at the end of the year. That makes things easier. The roof quotes started coming in yesterday.
[...] the introduction of the The Home Renovation Tax Credit (HRTC) people will be looking to take advantage and do some upgrades. In August 2008 I completed my own [...]
[...] Canadian Capitalist explains the newly proposed HRTC (Home Renovation Tax Credit). [...]
I BELIEVE THIS IS A NONSENSE TAX CREDIT FOR POOR LAW ABIDING CITIZEN LIKE ME. THIS TAX CREDIT CLEARLY IS ONLY FOR RICH PEOPLE. THIS TAX CREDIT CLEARLY IS FOR CONSERVATIVE RICH PEOPLE. WHY? REALITY. WHO CAN AFFORD TO PAY CASH FOR RENOVATIONS? THE RICH. I DON’T BUY THIS NONSENSE GIMMICK. TRULY & PRACTICALLY, IF THE POOR GETS A LOAN FROM THE BANK THINKING THAT AFTER 12 MONTHS, HE’LL BE GETTING A TAX CREDIT FROM RENOVATING HIS HUMBLE HOUSE. WRONG, BECAUSE IN 12 MONTHS , HE’LL BE PAYING MORE INSTEAD BECAUSE OF THE HIGH BANK INTEREST. IF THE CONSERVATIVE GOVT REALLY WANTED TO HELP THE POOR(HOURLY WORKERS/LABOURERS), THEY SHOULD RECOMMEND RETAIL STORES(WHERE POOR PEOPLE WORKS) TO GIVE THEM HIGHER HOURLY WAGES. THEY SHOULD INTERFERE WITH CITIES TO STOP RAISING PROPERTY TAXES. YOU DO THE MATH. GET A TX CREDIT VS. RAISING TAXES EVERY YEAR. POOR HOME OWNERS STILL LOOSE. CLEARLY, IF THE GOVT WANTED TO HELP THE POOR, GET RID OF GST AND PST. WE’RE PAYING ENOUGH PROPERTY TAXES THAT NEVER END IN GOING UP. EVERYTHING GOES UP EXCEPT THE POOR RETAIL STORE WORKERS HOURLY WAGES. PLEASE, IF AN MP, MLA, MAYOR OR CITY COUNCIL READS THIS, PLEASE TRY TO THINK THAT YOU’RE PAID TO MAKE LIFE EASIER, NOT MISERABLE. PLEASE HELP THE POOR WITHOUT ANY CONDITIONS. PLEASE TRY TO UNDERSTAND THAT IF POOR PEOPLE BECOME MORE POORER, THEY’LL TEND TO DO BAD THINGS JUST TO COPE UP WITH LIFE. I WORK 2 JOBS AND SOMETIMES WORK A 3RD PART TIME JOB. I WORK HARD TO PAY MORE TAXES IN THE END. I WORK PER HOUR WHILE I AM STILL YOUNG. THANKS FOR READING MY COMMENT.
Wow, Practical, Gear down there big rig . . . You’re going to blow a gasket or something.
You are correct, the more money you make, the more tax you pay. That’s how our system works, the people that strive to make more money are held back by those that leech off the system. Don’t blame the government for that, blame the people who should be out working hard like you.
I am looking at building a detached garage on my property
next to my home does this qualify for the HRTC.
Thanks’ Bill Morrow
Bill: As it is of “enduring nature”, I’d say it is eligible for the HRTC. Keep the receipts and look for clarifications from CRA when doing your 2009 taxes.
When doing my taxes if I have already paid from my pay cheques throughout the year all the taxes I owe, then will taking advantage of this HRTC benefit me? Will I get a cash refund for the amount up to $1350? OR If put enough money into RRSPs to get to $0 refund, can I take advantage of the HRTC to get a cash refund of up to $1350?
Jim Skiwer, you are also making the mistake that Winnipegkevin was above. The tax credit will benefit under these two conditions:
1) You pay federal income tax
and
2) You make lasting improvements to your home that fall under the HRTC.
It doesn’t matter when and how you pay the tax, if you use a credit that was not deducted from your withholding on your paycheck then you will get a refund after year end as long as you’ve paid taxes and you then use the HRTC.
Say for example you make 50000 in 2009, assuming you’re single and have no other deductions/credits you would pay 6017 in federal income tax. If you’ve paid 231.42 in 26 payments on a bi-weekly paycheck through 2009, or you pay it at year end because you are your own business doesn’t really matter all that much. When you file your tax forms in 2010 for the 2009 tax year you find out how much tax you should have paid on your income. If you’ve paid the government 6017 dollars, and then file your taxes but also include $10000 in receipts for a home improvement you tax bill moves from 6017 down to 4667. If you’ve already paid them 6017 through the year, then they need to send you the difference, if you haven’t paid them anything yet you would then have to pay them the whole 4667 amount.
For your next question, yes, as long as you’ve still paid taxes after your RRSP deduction then your credit still is beneficial. Using the same example the 50000 earner originally owed 6017 in taxes. They decide to put 10% of their income in to an RRSP since that how much the wealthy barber said, so their tax bill for federal income tax goes from $6017 to $4917. They also spent $10000 on making a rec room in their basement, their tax bill goes down another $1350 to be $3567. If they have already paid $6017 from their withholding on their paycheck then they’ve paid $6017 for a bill that they owe $3567, so the government sends them their change (IE, a refund check) for $2450.
Only in a case where your don’t earn enough income to pay tax would a non-refundable tax credit not help. In the case if the 50000 earner, if they happened to put $39680 in an RRSP cause they won 50K on a scratch and win ticket, and then they used the other 10360 from the 50K ticket to re-do their rec room, no the tax credit won’t help here.
Wow, that turned in to a huge reply . . .
Does the amount you claim have to be from one job only? If I do one eligible expense in March for $1500 and then a second, unrelated, eligible expense in June for $3000 can I claim them both for a total of $4500?? Or am I only allowed to claim one or the other.
Pat;
You could have ten $1000 jobs, and they’d all be valid expenses (well except for the first $1K, which is not eligible)
we have purchased a duplex in another town where we plan to retire next year. It is being totally renovated. We are using one unit as a summer home for the time being and Hoping to rent out the other one. The duplex is in joint ownership. Would we each be able to claim the 1300 dollars or is none of it eligable because we do not live there permantly as yet?
Although purchasing new appliances are not eligible, in an attempt to update my kitchen I was planning on replacing the built-in stove top and installing a new built-in oven in the near future. Because these are a permanent improvement to the home and not moveable appliances, would this be considered eligible under HRTC?
Kathy,
I think if the installation of the appliance required a contractor, and the oven is purchased by the contractor and is a part of his invoice, I think it would be eligible. But I really don’t know for sure. If you were doing the work yourself, then I would say no.
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Is the HRTC even approved yet? It always says the ‘proposed’ credit.
The credit will only be available for the 2009 tax year and applies to eligible expenditures of more than $1,000.
Is this means I have to spend $1000 or more per item to be eligible?? for example if I brought some print for around $200 and print the house or room myself. The $200 receipt is not eligible for renovation tax??
Renovation
Jeff;
what do you mean by print?
if you mean ‘paint’, then yes it’s an eligible expense.
you add up all the dollars you’ve spent on renovation projects, even if they’re only a couple dollars here and there.
if that total is more than $1000, then every dollar over $1000 (up to 10K) is eligible for 15% back.
if the $200 is the only money you spend on renovations, then no, it would not be enough to get money back.
I need to clarify how this credit will actually work. Let’s say for argument’s sake I spend $8,000 on a new driveway and deck. After taking away $1000, the remaining portion eligible for the tax credit is $7,000, right? Now, next year, when I have to enter an amount into the non-refundable tax credit portion of the return ( the new line), do I enter $7,000, or 15% of $7,000?
Thanks
Do I have to hire a contractor to be eligible for the tax credit or do Do-it-Yourself renovations qualify?
Re shingling a roof IS covered (pardon the pun)
http://www.cra-arc.gc.ca/tx/ndvdls/sgmnts/hmwnr/hrtc/lgbl-xpns-eng.html
For the HRTC, the maximum non refundable credit is $1350 based on $9000.00 worth of renovations. My understanding is that a new line will be added to Schedule 1 of the CRA tax return. If this is lumped in with the other non refundable credits then your real credit is only $202.50 since currently you multiply the total of your credits by 15% at line 24 of Schedule. Am I correct?
@John: No, that’s incorrect. If you spend $10,000 on renovations, you get the maximum HRTC tax credit of $9,000 ($10,000 – $1,000), which is worth $9,000 x 15% = $1,350.
Canadian Capitalist you are correct as am I about the max $1350 HRTC. Now take that $1350 non refundable credit and plug it into Schedule 1 of your tax return. At line 24 of Schedule 1 you take the total of all non refundable tax credits and multiply the total by 15%. So the real HRTC return is only $202.50.
@John: The HRTC Tax Credit is $9,000. It is *worth* $1,350 in tax savings. You should plug in $9,000 as the non-refundable tax credit, not $1,350.
What a joke. Here in Quebec, renovators are charging a lot more now that there is this tax credit. I would have cost me far less if there were no such program.
Yes Andre, demand causes the price to rise. This proves that the HRTC program is working. Thanks.
[...] February 1, 2010: Deadline for home improvement expenses to qualify for the Home Renovation Tax Credit. [...]
The HRTC is a great thing. I replaced a bunch of windows this year. It put people to work and that benefit trickled through the economy in countless ways. I pay a lot of taxes, and am grateful for the this small credit. It stimulated economic activity at a time when it was needed.
People who fail to see this basic concept should get a job and start contributing to society.
[...] is almost certain that the popular Home Renovation Tax Credit won’t make a [...]
HRTC? total income $20000 … renovation expenses 12000… hrtc refund only $600 why?
JS, There could be lots of reasons, mainly that it was a non-refundable tax credit. Meaning that you can only get back taxes that you paid. Look at your tax return and see how much tax you paid. If it was 0$ then you couldn’t get any more money back.
For the 2009 tax year a person earning $20,000 would only pay $1,121 in federal income tax. This assumes you have no other credits than the basic amounts (IE, no spouse, no kids, no special circumstances at all). The refund could not possibly be bigger than this amount, and that amount would be reduced with every other deduction and credit you have on your tax forms.
You did not provide enough information to answer your question in more detail.
[...] The Home Renovation Tax Credit (HRTC) [...]
Unfortunately we have been faced with replacing the roof (completed by a professional) at our cottage AND at our dwelling & a 1 car garage roof. Both jobs / work has been or is being completed by a professional with prior estimates received. My question is this: is there a Renovation/Repair Tax Credit for the expenses related to the work completed on both jobs in 2011? I could not see the answer in the info I read on your web site. Thank you.
@Wayne Banks: Unfortunately, you are out of luck. The HRTC was available only for a very limited time period.