Invest in Your Home: New Home Renovation Tax Credit

By Bennett Gold LLP, Chartered Accountants

While your tax focus now may be in compiling the information your accountant needs for your 2008 returns, it's also a good time, as spring approaches, to consider ways to fix up your home and take advantage of the new Home Renovation Tax Credit, which is good only for this year.

The new budget included a 15 per cent tax credit that can be claimed on expenditures between $1,000 and $10,000 for "enduring alterations" to eligible homes or for landscaping. The maximum amount you can get back is $1,350 ($9,000 x 15 per cent).

To get the most out of your renovation dollars you may want to consider combining the tax credit with some energy-efficient home improvements that qualify for as much as $5,000 in tax-free federal and provincial grants. You can save even more if the alterations to your home qualify for the medical expense tax credit. (See right-hand box for examples of how the renovation tax break works in combination with the ecoENERGY grants and medical expense credit.)

The renovation credit is only available on work performed or goods purchased after Jan. 27 this year and before Feb. 1, 2010. Money spent under a contract signed before Jan. 28 isn't eligible for the credit.

The renovations must be done on a house, cottage or condominium that is owned by and the principal residence of you or one or more of your family members. If you renovate both a home and a cottage, the maximum $10,000 is the total amount you can spend on both properties to still get the credit. You cannot spend the maximum on each property.

Taxpayer eligibility for the credit is family based. In terms of the tax credit, a family is considered to be an individual or an individual and his or her spouse or common-law partner, and their children under the age of 18. A family is allowed one tax credit that may be shared among the related individuals.

If two or more families share the ownership of an eligible dwelling, each family will be eligible for its own separate credit that will be calculated on their respective eligible expenditures.

You may claim the credit only for projects that are integral to the dwelling, such as:

• Renovating a kitchen, bathroom or basement.
• New carpeting or hardwood floors.
• Building a deck.
• Painting the interior or exterior of a house.
• Resurfacing a driveway.
• Installing a new furnace or water heater.
• Laying sod.

Related expenses such as building permits, professional services and equipment rentals are also eligible for the tax credit.

You may not claim the credit for routine repairs and maintenance, expenditures that are not integral to the dwelling, furniture, appliances, construction equipment, tools, carpet cleaning and financing costs.