28 October 2009 Ministerial Correspondence 2009-0339561M4 - HRTC - Condominium - Eligible Expenditures

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: 1. How to calculate each owner's share of the eligible expenditures for the common areas?

2. If a condominium's balcony railings are replaced, would the replacement costs be divided among just those who own the units with balconies?

3. What is the maximum amount of eligible expenditures that each condominium unit owner can claim for the HRTC?

4. Can a condominium corporation claim the HRTC on its own?

Position:

1. Generally, the expenses incurred for common areas are allocated among unit owners based on the condominium corporation's governing documents.

2. It depends. If balconies are part of the common areas, the replacement costs of balcony railings should be divided among individual owners according to the corporation's governing documents. However, if balconies are not part of the common areas, the replacement costs of those railings can be divided among the specific unit owners.

3. The maximum eligible expenditure that a family can claim is $10,000. The expenditure limit for the HRTC applies to a family's total expenditures for all of their eligible dwellings and not to each dwelling.

4. No.

Reasons:

1 & 2. Each condominium corporation is governed by its own unique rules, regulations and bylaws.

3. Draft section 118.04 of the Income Tax Act

4. Generally, for purposes of the Income Tax Act, the definition of individual does not include a corporation. Therefore, a condominium corporation is not considered to be an eligible individual for purposes of the HRTC and will not be permitted to claim or receive the HRTC on behalf of the unit owners.

XXXXXXXXXX

Dear XXXXXXXXXX :

I am writing in response to correspondence received from your office on August 25, 2009, concerning the new home renovation tax credit (HRTC). In particular, you want to know, on behalf of a condominium board, whether certain expenditures for common areas will qualify for the HRTC and how to calculate individual unit owners' share of these expenditures.

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.

In the case of condominiums, the HRTC can be claimed for eligible expenditures to renovate an individual unit that is an eligible dwelling, and it can be claimed as well for the unit owner's share of eligible expenditures for common areas. Renovations to the common areas will qualify for the HRTC if all of the above conditions are met. However, routine maintenance and repairs normally performed on an annual or more frequent basis will not qualify for the HRTC.

Generally, expenses paid for common areas should be divided among unit owners based on the condominium corporation's governing documents. In most cases, balconies are part of the common areas; therefore, the replacement costs of balcony railings should be divided among individual owners according to the corporation's governing documents. However, if balconies are not part of the common areas, the replacement costs of those railings can be divided among the specific unit owners.

Furthermore, the expenditure limit for the HRTC applies to a family's total expenditures for all of their eligible dwellings and not to each dwelling. Therefore, the maximum expenditure that a family can claim is $10,000. A family will generally be considered to consist of an individual, his or her spouse or common-law partner, and their children who are under the age of 18 throughout 2009.

As mentioned above, the HRTC is a non-refundable tax credit available only to individuals. Generally, for the purposes of the Income Tax Act, the definition of "individual" does not include a corporation. Therefore, a condominium corporation cannot claim the HRTC on its own.

You can find more information on the HRTC, including a list of eligible expenses, on the Canada Revenue Agency Web site at www.cra.gc.ca/hrtc and in the enclosed Government of Canada brochure, which is also available at www.actionplan.gc.ca/grfx/docs/HRTC_eng.pdf.

I trust that the information I have provided is helpful.

Sincerely,

Jean-Pierre Blackburn, P.C., M.P.

Enclosure

Ananthy Mahendran
(905) 721-5204
2009-033956