We have all been hearing a lot about the Home Renovation Tax Credit this year, but does the general public really understand how it applies? The government commercials will lead you to believe that if you spend $1350, you will get that money back on your income tax return. This is not the case. To get $1350 back, you need to spend $10,000! Also, you need to spend a minimum of $1000 to be eligible for a credit at all. 15% of your expenses, up to $10,000 less $1000 is the maximum you can claim. Here is the formula that is used to calculate the credit you will receive. [($10,000 − $1,000) × 15%] = $1350. Confusing! Here is an example to help you understand. If you spend $4000 on renovations, you will get a credit of $450 on your 2009 tax return.So to apply the above formula to the person who spent $4000, his/her income tax credit would be[($4000 - $1000) x 15%]= $450. Not exactly what people perceive they would be getting watching those commercials!

It applies to work performed or goods acquired after January 27, 2009, and before February 1, 2010 under an agreement entered into after January 27, 2009. Even if you purchase the products, but don't install them before February 1, 2010, the expense is still eligible to be applied to your 2009 income tax return.

Although I do believe this is a great idea to stimulate the economy, and we all like a tax credit, I think the government could have been more clear on how it will be applied. 

If you'd like some helpful renovation tips that will improve the value of your home for resale, feel free to contact me anytime at  bart@thenevilleteam.com . Have fun renovating!

Bart

A few helpful links:

Home Renovation Tax Credit:  http://www.cra-arc.gc.ca/hrtc/  

Home Renovation Ideas & Tips: http://www.homerenovationguide.com/ 

Bart Neville, Broker of Record, Century 21 Neville Realty Ltd., Brokerage