Principal Issues: Who would qualify for the home renovation tax credit (HRTC) if expenditures are incurred for common areas of a condominium and are paid out from a condominium reserve fund?
Position: If renovations are made in the common area of a condominium and the unit is an eligible dwelling, the individual would be able to claim the HRTC on his or her share of the total cost of renovating common areas.
Reasons: 2009 Federal budget statements; Notice of Ways and Means Motion (September 14, 2009)
October 16, 2009
XXXXXXXXXX 2009-033785
A. Mahendran
Dear XXXXXXXXXX :
We are responding to your correspondence, which we received on August 13, 2009, regarding the new home renovation tax credit (HRTC). In particular, you would like to know who would qualify for the HRTC if expenditures are incurred for common areas of a condominium and are paid out from a condominium reserve fund.
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 was introduced in the House of Commons on September 30, 2009, by the Honourable James M. Flaherty, Minister of Finance. The proposed legislation 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 incurred to renovate the condominium unit that is an eligible dwelling, and it can be claimed as well for the individual owner's share of eligible expenditures incurred for common areas. Generally, the expenses incurred for common areas are allocated to unit owners based on the condominium corporation's governing documents. Providing all of the above conditions are met, upgrades to the townhouse condominium will qualify for the HRTC even if they are paid out of the condominium reserve fund.
We would like to emphasize that the HRTC is not a rebate but a non-refundable income tax credit provided to individuals for eligible expenditures made in respect of eligible dwellings. Similar to other non-refundable income tax credits, the HRTC will reduce a taxpayer's federal income tax payable, but will not result in a refund if the taxpayer's total non-refundable tax credits, including the HRTC, are greater than their income tax payable.
You can find more information on the HRTC on the Canada Revenue Agency Web site at www.cra.gc.ca/hrtc.
We trust that the information provided is helpful.
Yours truly,
Nerill Thomas-Wilkinson
Acting Manager
for Acting Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
