If you've been putting off home renovations, now is the time to act.
In an effort to boost this particular sector, the federal government introduced the Home Renovation Tax Credit, which puts money in your pocket and those in the home renovation industry.
The measure was introduced last month in the federal budget and can provide up to $1,350 in tax relief on qualified work on an eligible dwelling. The temporary 15% non-refundable income tax credit applies to certain services or goods procured after Jan 27, 2009 and before Feb 1, 2010. Both the Ontario Home Builders' Association and the Canadian Home Buiders' Association welcome the tax incentive.
To qualify the home must be the applicant's principle residence and inhabited by their family (spouse/common-law partner or their children [under 18 years old]): one credit per family.
Examples of applicable work includes, installing new carpet, or hardwood, floors, building a deck, an addition, fence, retaining wall, renovating a kitchen bathroom, or basement, installing a new furnace or water heater, laying new sod,resurfacing a driveway, painting the interior or exterior of the house.
Some ineligible work/purchases include curtains, drapes, furniture and appliances (for example: refrigerator, stove, couch), audio and visual electronics, tools, carpet cleaning, maintenance contracts such as house cleaning, furnace cleaning, lawn care. etc.
Qualified expenditures must be more than $1000 but no more than $10,000. Keep all relevant documentation (detailed receipts, invoices, contracts, etc.,) that clearly identifies the name of the vendor/contractor, business address, GST/HST registration numbers, a description of the goods and services provided, date they were acquired, address at which services were provided and proof of payment.
According to the Revenue Canada Agency's (CRA) website, certain work by certain people may not qualify you for the credit.
"Expenditures will not be eligible if the related goods or services are provided by a person not dealing at arm's length with the individual, unless that person is registered for the Goods and Services Tax/Harmonized Sales Tax under the Excise Tax Act."
Furthermore, the CRA says those who rent a part of the home and renovate it for a tenant cannot claim the credit.
"Individuals who earn business or rental income from the part of their principal residence will be allowed to claim the credit only for expenditures made for the personal use areas of the residence. For expenditures made for common areas or benefit the housing unit as a whole (such as re-shingling a roof), you must divide the expense between personal use and income-earning use."
Your personal income tax will have a new line to accommodate the new tax credit. You will not have to submit the supporting documentation but you will have to provide it at CRA's Request.