Home Renovation Tax Credit - CRA

The Federal Government’s Home Renovation Tax Credit (or HRTC) may just be the incentive many homeowners need to get off their wallets and spend, spend, spend. Consumers, however, need to be aware that not all those little extra upgrades they’d like to do around the home are covered.

Making its debut on January 27, 2009, the HRTC was part of the 2009 Federal Budget and created to provide $3 billion in tax credits to Canadians to stimulate and encourage investment in housing.

Jackie Kendall, who admits that pretty much every room in her house has been reconstructed, is ready to take advantage of the HRTC and perform yet another upgrade, this time to their bathroom, "This is our little black hole that I have always detested" says Kendall.

Extensive renovations to the bathroom will include removing a wall that connects to her spare room - shrinking the size of her Elvis shrine to expand her bathroom into something truly special.

A new soaker tub and a new walk-in closet are just a few of the additions Kendall will be adding to create her new bathroom. Her renovations are budgeted at about $17,000. Under the renovation tax credit Kendall will only be allowed to claim up to $10,000 - for a maximum credit of $1,350.

The nice thing about the tax credit is that you don’t need to have somebody else do the work for you, you can do it yourself.

The main condition with the HRTC is that the work done to your home needs to be something substantial. "You have to do something that is permanent to the residence," explains Rob Quinn from Revenue Canada, "renovate a kitchen, a bathroom, living room, replace the roof, do something that is significant to the property."

To claim the credit, you need to have started the work after January 27 of this year and have it completed by February 2010. You then apply for the credit on your 2009 tax return.

The renovations you get done to your house don’t need to be structural, they have to be something that improves or modifies the existing dwelling or land, "You can’t buy a new fridge or a new stove, or draperies, TV set, audio system...that doesn’t qualify," says Quinn.

The 15 per cent tax credit can be claimed on eligible expenses of more than $1,000 but not more than $10,000. The key thing to remember in all this is the word "eligible".

Eligible expenses include:

* Renovations to a kitchen, bathroom or basement
* New carpet or hardwood floors
* Building of decks, fences or retaining walls
* New furnace or water heater
* Painting interior or exterior of your home
* Resurfacing a driveway
* Laying new sod

Ineligible expenses are:

* Furniture or appliance purchase
* Purchase of tools
* Carpet cleaning
* Maintenance contracts

Moving forward, if you decide to do the work yourself, you can get your friend or brother-in-law to help out, but you can’t claim their wages unless they are contractors with a business licence and GST number.

If you’re hoping to hire a contractor to do the work, you may have your work cut out for you. Local contractors are saying that openings for this year are booking up fast.

While hiring a contractor might give you a sense of security, independent contractor Art Bonner says you should check on three things before you proceed: "You have to make sure they have a business licence, second they need WCB, third they should have liability insurance to work in your home. God forbid something should go wrong."

It’s uncertain if the Home Renovation Tax Credit will stimulate the economy, but this could be just the thing to sway a decision on whether or not you renovate your home...and get rid of your Elvis shrine once and for all.