12 November 2009 Ministerial Correspondence 2009-0331141M4 - Eligible expenditures- home renovation tax credit

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: What is the documentation/process to support a claim for renovations to the common areas of the strata corporation or to the individual strata lots?

Does landscaping costs, specifically tree trimming qualify for the HRTC?

Are the maximum allowable expenditures for a building dispersed equally among all owners?

Position: Each strata lot owner will need documentation from the corporation or the board of directors that identifies the amounts incurred for the renovation work. For work performed on common areas, the documentation should clearly identify the strata lot owner's portion of these expenses. Supporting documentation should include the name of the contractor and, if applicable, the goods and services tax/harmonized sales tax (GST/HST) registration number, a description of the work performed, and the dates when the work or services were performed. Documentation can be in the form of a letter from the corporation signed by an authorized individual, and it can include copies of agreements, invoices, or receipts.

Pruning or trimming of trees to maintain their health are considered maintenance services and are not eligible expenses for the HRTC.

The maximum eligible expenditure for the HRTC is family-based. Family members will be subject to a single limit based on their pooled eligible expenditures.

Reasons: Draft legislation

XXXXXXXXXX

Dear XXXXXXXXXX :

The office of the Honourable James M. Flaherty, Minister of Finance, forwarded to me a copy of your correspondence regarding the new home renovation tax credit (HRTC) as it relates to residential strata corporations. Please accept my apology for this delayed reply.

The proposed HRTC will provide individuals with a temporary 15% non-refundable income tax credit on eligible home renovation expenditures for work performed, or goods acquired, after January 27, 2009, and before February 1, 2010, for agreements entered into after January 27, 2009. Taxpayers can claim this credit for the 2009 tax year on eligible expenditures exceeding $1,000, but not more than $10,000, which will result in a non-refundable tax credit of up to $1,350.

The legislation regarding the new HRTC, which was introduced in the federal budget tabled on January 27, 2009, has not yet been made law. However, the draft legislation publicly released on September 14, 2009, states that expenditures will qualify if they are directly attributable to a renovation or an alteration of an eligible dwelling, including land that forms part of the eligible dwelling, and if the renovation or alteration is of an enduring nature and is integral to the eligible dwelling. Such expenditures will include the cost of labour and professional services, building materials, fixtures, equipment rentals, and permits.

An eligible dwelling is a housing unit located in Canada that is owned by the individual, at the time of the renovation, and ordinarily inhabited by the individual, his or her current or former spouse or current or former common-law partner, or his or her children at any time after January 27, 2009, and before February 1, 2010. Therefore, any housing unit that an individual owns and uses personally, including a home and a cottage, qualifies for the HRTC.

When individuals own an interest in a strata corporation, they can claim the HRTC for eligible expenditures incurred to renovate the strata lot that is eligible dwelling, and they can claim it as well for their share of eligible expenditures incurred for common areas. Generally, the expenditures incurred for common areas are allocated to strata lot owners based on the governing documents of the strata corporation.

To support a claim for renovations to the common areas of the strata corporation or to the individual strata lots made by the strata corporation's board of directors on behalf of the individual owners, the owners will need documentation from the corporation or the board of directors that identifies the amounts incurred for the renovation work. For work performed on common areas, the documentation should clearly identify the strata lot owner's portion of these expenses. Supporting documentation should include the name of the contractor and, if applicable, the goods and services tax/harmonized sales tax (GST/HST) registration number, a description of the work performed, and the dates when the work or services were performed. Documentation can be in the form of a letter from the corporation signed by an authorized individual, and it can include copies of agreements, invoices, or receipts.

Landscaping costs such as new sod, perennial shrubs, flowers, trees, large rocks, and permanent garden lighting, water fountain, ponds, and large garden ornaments, are eligible for the HRTC. Services such as the pruning or trimming of trees to maintain their health are considered maintenance services and are not eligible expenses for the HRTC.

You asked if the maximum allowable expense will be dispersed for a building with 50 suites. The maximum eligible expenditure for the HRTC is family-based. A family will generally be considered to consist of an individual, the individual's spouse or common-law partner, and the individual's children who are under the age of 18 years throughout 2009. Family members will be subject to a single limit based on their pooled eligible expenditures.

Please continue to follow the Canada Revenue Agency's Web site at www.cra.gc.ca/hrtc for HRTC updates. The HRTC brochure is available at www.actionplan.gc.ca/grfx/docs/HRTC_eng.pdf.

I trust that the information provided will be helpful.

Sincerely,

Jean-Pierre Blackburn, P.C., M.P.
Minister of National Revenue

George A. Robertson
(905) 721-5196
2009-033114