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Mike Holmes: Make it Right, Canwest News Service
Published:Thursday, June 04, 2009
National Post

Most homeowners have heard by now of the Home Renovation Tax Credit, and many are taking advantage of it. The idea of the tax credit is to stimulate local economy by keeping contractors working and keeping building supply retailers busy.

It's a win-win: Invest in your home, and invest in your local economy.

The tax credit is temporary, must be claimed on your 2009 tax return next year, and you'll get the rebate back with your tax refund. The work has to be completed by Feb. 1, 2010.

The credit includes renovations to kitchens, bathrooms or basements, new carpeting or flooring, building additions, decks, retaining walls, installing furnaces or water heaters, painting or driveway resurfacing.

Another benefit of the renovation tax credit is that it will keep homeowners out of the grey-market economy. It's a great incentive for homeowners to go legal and work above the table. That means a paper trail, contracts, building permits and inspections and hiring a legitimate contractor who'll give them an invoice for their services. Because without an invoice you can't claim the credit when you file next year.

The grey market is worth billions of dollars per year and working under the table costs the government millions of dollars a year in lost tax revenue. Consumers don't want to pay the GST the contractor has to charge. They'd rather spend that same money on the job. So, they offer to pay cash to avoid it - I get it.

That puts a contractor in a bad spot; he either works under the table, or he walks away from the job. The legitimate contractor will walk away - he doesn't need to compromise his integrity (and, let's be honest here, it might be a good clue to him what kind of client you would be to deal with).

That leaves you with the other guy: The guy who works for cash and who's willing to cut his rate and cut a deal. But don't kid yourself: Things cost what they cost - and don't think for a minute any contractor is taking those cash discounts and deals out of his bottom line. Do you think he's nuts? No way. That discount is coming out of your job, somewhere.

Think about that for a minute.

In the 1990s, when the GST was first introduced, there was an increase in the number of cash jobs. (There was a recession on then, too.)

Legitimate, professional contractors who pay taxes and have their paperwork in place have always been in competition with the underground guys who can charge less for their work because they don't pay taxes. They also don't provide an invoice, don't guarantee their work, and don't have insurance or a licence.

Now that there's an incentive from the government in the form of the tax rebate, homeowners are more willing to go legit, since they'll get the money they'd be paying in tax back in the tax credit.

But, here's the problem: Good, legitimate contractors have always been busy. There's a shortage of skilled tradespeople. They are busy. You'll have to wait. Don't rush. Don't choose the first - or the only - guy that's available.

People are going to be in a rush to get the job done. And rushed renovations never turn out well. Never.

If you thought it was hard to find a good contractor before, look out.

Now, with the deadline on the tax credit looming, it's even harder to find one. So, that might make some people - impatient ones - choose badly since they aren't willing to wait.

Believe me - whatever you might save in a tax credit is not enough to make up for what it'll cost you to go with the wrong contractor.

Roger Townsend

Roger Townsend

Broker
CENTURY 21 People's Choice Realty Inc., Brokerage*
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