Budget 2009 introduces a series of innovative measures timed to provide some much-needed uplift to residential renovation and resale activity, which has been hard hit in many regions across Canada. In times of financial uncertainty, investments in residential housing remain relatively "safe" portfolio assets, given their intrinsic value. Furthermore, in the broader economy, stronger residential investment provides economic stimulus to the construction and forestry industries, two other areas that have been hit hard by the U.S. downturn.
The centrepiece of Budget 2009's residential investment mission is the new temporary Home Renovation Tax Credit (HRTC). The new HRTC will apply to eligible home renovation expenditures for work performed (or goods acquired) after January 27, 2009, and before February 1, 2010. A 15 per cent credit may be claimed on the portion of eligible expenditures exceeding $1,000 but not more than $10,000. Eligible homeowners will be entitled to a maximum tax credit of $1,350 (based on $10,000 in spending minus the first $1,000 that is not covered) for renovations carried out on one or more of their dwellings. HRTC outlays will total $500 million in 2008-09 and will rise to $2.5 billion in the following fiscal year.
In addition to the HRTC, Budget 2009 also implements:
- A permanent new, non-refundable First-Time Home Buyers' Tax Credit, based on an amount of $5,000 for first-time home buyers who acquire a qualifying home after January 27, 2009. The credit will also be made available for certain acquisitions of a home by or for the benefit of an individual who is eligible for the disability tax credit. By fiscal year 2009-10, this initiative will provide $175 million in assistance to first-time home buyers.
- The introduction of the ecoENERGY Retrofit program, which will provide $300 million over two years to home and property owners by means of grants of up to $5,000 for making homes more energy efficient.
- A further increase of $15 million of permanent fiscal assistance to first-time home buyers will become available through the existing Home Buyers' Plan (HBP). Enhancements to the HBP will allow first-time home buyers to withdraw up to a maximum of $25,000 from a registered retirement savings plan without having to pay tax on the withdrawal-an increase from the previous threshold of $20,000. These higher thresholds become effective in tax year 2009 and apply to any withdrawals made after January 27, 2009.
Courtesy of the Conf Board of Canada.