Actualis



March 2009
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Ready to renovate?

One of the most talked-about features of our governments’ recovery plans is the home renovation tax credit. But pay attention:  the federal and provincial programs have their differences!

Quebec home-owners now have two more reasons to go ahead with renovations:  the federal government’s new Home Renovation Tax Credit and the similar program introduced a few weeks earlier by the Quebec government. These measures are intended to provide a boost to the construction industry. This makes sense:  Canadians spend a whopping $40 billion annually on home renovations. The construction industry provides a lot of jobs, and with most construction materials made right here, it puts dollars directly into our economy.

Federal program

In a nutshell, the federal program works like this:

  • you can claim a tax credit of 15% of the cost of an eligible project;
  • this tax credit kicks in after the first $1,000 worth of work;
  • it only applies to the first $10,000 spent on the reno;
  • it applies to work done between January 27, 2009, and February 1, 2010.

Provincial program

The provincial program is set up quite differently:

  • the tax credit can cover up to 20% of the cost of an eligible project;
  • it kicks in after the first $7,500 worth of work;
  • it applies to work done between January 1, 2009, and June 30, 2010;
  • the maximum credit is $2,500.

Perfect planning

To get the most out of these credits, a Quebec taxpayer has to spend $20,000 on an eligible project. This will result in a federal tax credit of $1,350 (15% of the total cost over $1,000 and up to $10,000, i.e. $9,000) and a provincial tax credit of $2,500 (20% of the total cost over $7,500, i.e. $12,500).

Other differences

While the federal government allows for do-it-yourself work, Quebec requires that the reno be done by a contractor licensed by the Régie du bâtiment. Another difference:  eligible projects. For instance, painting qualifies for the federal program, but not for its provincial counterpart.

However, both can be combined with other renovation assistance programs, such as Hydro-Quebec’s Renoclimat program. Interestingly, a hardware chain has also announced that it will offer a 10% discount on purchases to be used on projects that qualify for the Quebec program.

Do the math

Keep in mind that renovations should never be taken lightly. Here are a number of factors to consider before going ahead.

  • Can you afford it? Take a good look at your debt load, job security, and ability to obtain credit, if necessary.
  • If the tax credit is going to be eaten up by the cost of financing, you’d do better to wait until you have the cash saved up for the work.
  • Don’t forget that you will only be able to claim the credits on your tax returns for 2009. That won’t be until 2010.
  • And, above all, make sure that the work you’re planning is eligible for the credits!

Renovation can be a very wise investment, increasing the value of your home while making it more comfortable. Even so, it’s not the sort of project that you should undertake solely to reduce your taxes. If you were considering doing the work anyway, however, these new tax credits will certainly provide a nice bonus at tax time… in 2010.

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