29 October 2009 Ministerial Correspondence 2009-0340161M4 - HRTC- New Homes

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: Are payments to a new home builder for the costs of upgrades to a new home eligible for the HRTC?

Position: No. The upgrades were made by the builder before title passed to the purchaser.

Reasons: At the time the upgrades were completed, the house was not an eligible dwelling of the purchaser.

XXXXXXXXXX

Dear XXXXXXXXXX :

Thank you for your correspondence received on September 3, 2009, regarding the new home renovation tax credit (HRTC). You asked why upgrades made by the builder and added to the purchase price of your home do not qualify for the HRTC.

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.

Since title to your house had not likely passed from the builder to you at the time the upgrades were made by the builder, the house was not your eligible dwelling at the time of the renovation. Therefore, upgrades made by a builder before title was transferred do not qualify for the HRTC.

The Canada Revenue Agency (CRA) is responsible for providing interpretations of income tax law, but not for developing and evaluating federal tax policy or amending income tax law. Federal tax policy and amendments to income tax law are the responsibility of the Department of Finance Canada. If you want to pursue your concern further, you can contact the Tax Policy Branch of the Department of Finance Canada by writing to 140 O'Connor Street, Ottawa ON K1A 0G5.

You can find more information on the HRTC on the CRA Web site at www.cra.gc.ca/hrtc and in the Government of Canada brochure available at www.actionplan.gc.ca/grfx/docs/hrtc_eng.pdf, a copy of which I am enclosing for your convenience.

I trust that the information I have provided is helpful.

Sincerely,

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

Enclosure

Robert Dubis
(905) 721-5191
2009-034016