6 August 2009 Ministerial Correspondence 2009-0310961M4 - HRTC - 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: If a homeowner performs the work, will the renovation or alteration qualify for the HRTC?

Position: Providing all other conditions are met, the costs of the renovation or alteration will qualify for the HRTC. The homeowner can do the work himself/herself; however, he/she cannot claim the value of his/her labour.

Reasons: Generally, under common law, a person cannot contract with oneself.

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Dear Colleague:

Thank you for your correspondence concerning the new home renovation tax credit (HRTC). 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 public. However, the Honourable James M. Flaherty, Minister of Finance, has publicly announced that expenditures will qualify if they relate 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 that is eligible at any time after January 27, 2009, and before February 1, 2010, to be an individual's principal residence. In general, a housing unit is considered to be eligible to be an individual's principal residence if it is owned by the individual and ordinarily inhabited by the individual, his or her spouse or common-law partner, or his or her children. Therefore, any housing unit that an individual owns and uses personally, including a home and a cottage, qualifies for the HRTC.

A contractor or a homeowner can perform the work and the expenditures will qualify if they meet the above mentioned criteria and are supported by acceptable documentation. Generally, labour performed by, or goods acquired from, oneself will not be eligible for the HRTC. Also, expenditures will not be eligible if the related goods or services are provided by a person not dealing at arm's length with the individual, such as a spouse or brother-in-law, unless that person is registered for goods and services tax/harmonized sales tax purposes under the Excise Tax Act. The following are examples of HRTC eligible expenditures:

• renovation of a kitchen, bathroom, or basement
• replacement of interior or exterior doors
• relocation of a gas meter from the inside of a house to the outside
• new carpet or hardwood floors
• building an addition, deck, fence, or retaining wall
• purchasing a new furnace or water heater
• painting of the interior or the exterior of a house
• a new driveway or resurfacing a driveway
• laying new sod

You can find more information on the HRTC on the Canada Revenue Agency 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.

I trust that the information I have provided is helpful.

Sincerely,

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

William King
(905) 721-5205
2009-031096