12 May 2010 External T.I. 2010-0358921E5 - Home Renovation Tax Credit - Central Vacuum

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: Is the installation of a central vacuum cleaner a qualifying expenditure for the purposes of the Home Renovation Tax Credit?

Position: No. However some of the costs associated with the installation might be eligible.

Reasons: A central vacuum cleaner is a household appliance and household appliances are specifically excluded from qualifying expenditures.

XXXXXXXXXX 2010-035892
Andrea Boyle, CGA
May 12, 2010

Dear XXXXXXXXXX :

Re: Home Renovation Tax Credit

This is in reply to your letter of February 25, 2010, in which you asked whether a central vacuum cleaner is eligible for the Home Renovation Tax Credit (HRTC). You indicated that you believe that it should qualify "because it is a permanent fixture for the home."

The particular situation outlined in your letter appears to relate to a factual one, involving a specific taxpayer. Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. We are, however, prepared to offer the following general comments, which may be of assistance.

All statutory references in this letter are references to the provisions of the Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, as amended ("Act").

The legislation regarding the new HRTC has been enacted and is contained in section 118.04. The HRTC provides individuals with a temporary 15% non-refundable income tax credit on eligible home renovation expenditures for services received or goods acquired, after January 27, 2009, and before February 1, 2010. However, expenditures for services received or goods acquired under agreements entered into before January 28, 2009, do not qualify for the HRTC. 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.

Under section 118.04, expenditures qualify for the HRTC 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 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.

The definition of a "qualifying expenditure" in the Act specifies, among other things, that a qualifying expenditure does not include an outlay or expense "to acquire a household appliance." Household appliances are therefore not eligible expenditures for the HRTC even if they are permanently installed or "built-in." We would consider a central vacuum cleaner to be a "household appliance."

Some of the costs associated with the installation of a central vacuum system could relate to renovations which we would not consider to be a "household appliance." Costs such as the modification of electric wiring or the installation of the hoses that run through the walls to the inlets around the home could qualify for the HRTC. However, expenditures relating to the central vacuum unit itself and its portable accessories or attachments (powerhead, brushes, and connecting hose) would fall under the category of a household appliance and would not be qualifying expenditures for the purposes of the HRTC.

We trust that these comments will be of assistance.

Yours truly,

Randy Hewlett
Manager
for Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch