HRTC Credit - An Update On The Status of Legislation

118.04(1) outlines the definitions applied to the new section:

"Eligible Dwellingî is defined as a housing unit, including Ω hectare of land surrounding the unit and located in Canada that is;

a) Owned by the individual whether jointly or otherwise for the sole purpose of habitation, including a co-operative housing unit.

b) The housing unit is ordinarily inhabited at any time during the eligible period buy the individual, spouse or common-law partner (current or former), or by a child of the individual under the age of 18 anytime during the calendar year..

"Eligible Periodî is defined as the period beginning January 28, 2009 and ending January 31, 2010.

"Qualifying Expenditureî is defined as an outlay or expense that is made or incurred and is directly attributable to a qualifying renovation by the individual, including permits and equipment rental. Not included as a "qualifying expenditure is;

a) Goods that have been used, or acquired for use for any purpose prior to being acquired by the individual or a qualifying relation;

b) Made or incurred prior under the terms of an agreement prior to January 28, 2009

c) To acquire property that can be used independently of the qualifying renovation;

d) That is the cost of annual, recurring or routine maintenance or repairs;

e) To acquire a household appliance excluding furnaces and other heating systems;

f) To acquire an electronic home entertainment device;

g) The cost of financing a qualifying renovation;

h) Costs incurred for the purpose of gaining or producing income from a business or property;

i) Goods and Services provided by a person not dealing at arms-length with the individual unless the person is registered for the purposes of GST/HST.

"Qualifying Renovationî is defined as a renovation or alteration of an eligible dwelling and must be of an enduring nature and be an integral to the eligible dwelling.

New section 118.04(2) covers the situation of a co-operative housing corporation and trusts where the eligible dwelling is owned by other than the "individualî.

In these circumstances the individual's share of the costs incurred by corporation or trust are considered to be incurred by the individual. The corporation or trust must notify the individual in writing of the individual's share of the qualifying outlay or expense.

s118.04(3) - The non-refundable tax credit is applied in the 2009 taxation year. The credit is determined as 15% of the qualifying expenditure in excess of $1,000 to a maximum of $10,000.

s118.04(4) ñ The application of the HRTC to renovations or costs incurred that may also qualify for the Medical Expense Tax Credit under s118.2 will qualify for both credits, notwithstanding s.248(28)(b)

s118.04(5) ñ Where more than one individual is entitled to the HRTC in respect of a qualifying expenditure, the total amounts claimed by all individuals cannot exceed the maximum amount allowable if one individual were claiming the HRTC.

If an individual, or a qualifying relation, own and live in the dwelling, you are entitled to claim the non-refundable Home Renovation Tax Credit.

An individual that incurred the costs prior to January 28, 2009 you will not qualify for the credit regardless of when the actual work and payment occurred. Consequently, if the costs were incurred during the eligible period, you will be able to claim the costs, even if the work is not performed and completed until after the eligible period.

Example:

Mary entered into a contract to have her roof replaced on January 27, 2009 and provided a deposit to the contractor. The work was performed and completed on April 15, 2009, within the qualifying period. Mary is not eligible for the Home Renovation Tax Credit on this renovation.

John entered into a contract on January 29, 2010 to have the windows replaced in his home and provided a deposit to the contractor. The work was completed on April 15, 2010, outside the qualifying period. John is eligible for the Home Renovation Tax Credit on this renovation.

If the renovation or alteration is an integral part of the home and will last a long time, it will qualify for the Home Renovation Tax Credit. This includes a provision allowing for homes owned by a trust or co-operative housing corporation to "flow-throughî the portion of the costs incurred to the individual. The trust or corporation must provide in writing the portion of the expense attributable to the individual.

If the renovation or alteration incurred also qualifies for the Medical Expense Credit under s.248(28)(b), both credits may be claimed on the 2009 tax return of the qualifying individual.

The credit, if it is shared between individuals, cannot exceed the amount that would be available if claimed by one individual.

Alan Rowell, DFA, President and Tax Specialist of The Accounting Place, specializes in working with individuals and small to medium size businesses by providing accounting and taxation services that are unique to each client. Alan is a faculty member of The Knowledge Bureau, and presented on the Tax Consequences of Debt for their January 2009 workshop tour.