Actualis



March 2009
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Ready to renovate?

One of the most talked-about features of the recovery plan announced by the federal government is a home renovation tax credit. Fed up with your old kitchen?

Canadians now have one more reason to renovate their homes: the new Home Renovation Tax Credit introduced by the federal government, intended to provide a boost to Canada’s 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 in Canada, it puts dollars directly into our economy.

How it works

In a nutshell, the 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.

 

Perfect planning

For a $10,000 reno, the credit will apply to the cost over the first $1,000, i.e. to $9,000. This would give you a credit of $1,350, or 15% of $9,000.

Do the math

Some 4.3 million families are expected to be eligible for this $3 billion program. Keep in mind, though, 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.
  • Now or later? 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 credit on your tax return for 2009. That won’t be until the spring of 2010.
  • Make sure that the work you’re planning is covered;  for instance, painting and remodelling are eligible for the credit; buying appliances for that freshly fixed-up space is not.
  • The credit applies on a family basis. So you can’t fix up your home in the city and your summer cottage and claim the full amount for each (both renos are eligible, but you can only claim $10,000 in total).
  • The program works in conjunction with the other home renovation programs available, such as:
    • the federal government’s ecoEnergy program;
    • the Ontario Home Energy rebate program;
    • Manitoba’s Power Smart Insulation Program;
    • the Live Smart program in British Columbia.

Spring 2010

Renovation can be a very wise investment, increasing the value of your home while making it more energy efficient and more comfortable. Even so, it’s not the sort of project you should undertake solely to reduce your taxes. But if you were considering doing the work anyway, this new tax credit will certainly provide a nice bonus at tax time... in 2010.

For more information



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