For Canadians who want to improve the value of their homes, or a homeowner getting a house ready to sell for top dollar in 2016 (as the economy continues to improve), the tax incentive being offered this year is not to be missed.
As part of Canada’s 2015 federal budget, the government will be providing economic stimulus to the tune of almost 30 billion dollars. One of the measures included in this largesse is the Home Renovation Tax Credit or HRTC.
The new tax credit isn’t quite as confusing as it sounds. The easy way to think of it is like this
- Homeowner pays the first $1,000 of renovation expenses (think of it like car, house or health insurance deductible)
- 15 percent of the remainder, up to a maximum of $10,000, can be claimed for the 2015 taxation year
There are certain parameters in place to determine whether one qualifies for the Canadian Government Home Renovation Tax Credit.
According to Canada Revenue Agency, eligibility is “family” based. For the purposes of this tax credit a family is defined as the primary homeowner, a spouse or common-law partner, and children if they are under 18 years of age at the end of 2015.
Generally, any dwelling that is owned and used by the taxpaying claimant. This includes a primary home, cottage, other secondary residence or any land that is part of the eligible dwelling. The operative words for this portion of the qualification is a dwelling that the homeowner and/or spouse, “own and use personally.”
Eligible Renovation Expenses
Improvements must be permanent in nature. Known as “fixtures” in real estate jargon, this includes anything that, if removed, would alter the nature of the dwelling. These improvements can include anything from carpeting and window coverings to a new roof or hot tub.
Also eligible are expenses incurred in relation to renovations such as permits, fees to contractors and tradespeople (plumbers, architects, electricians, etc). Be sure to keep receipts from home improvement centers and copies of contracts as these are required in order to claim the credit.
Ineligible Renovation Expenses
New furniture, tools, and appliances do not count as qualified expenses. Anything that can be removed from the home is not a qualified expense. There are a number of both included and excluded improvements and Canada Revenue Agency lists examples of both on their website.
Remember, if the expense incurred results in creating a fixture, something that is permanent in nature, it will most likely be qualified.
Time Limit for HRTC Credit
The expenditures must be made between January 17, 2015 and February 1, 2016. Any contract negotiated prior to January 17 can not be considered for the Canadian Home Renovation Tax Credit.