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: Does the cost of clearing trees and brush from a cottage lot qualify for the home renovation tax credit (HRTC)?
Position: On its own, the clearing of trees would not qualify for the HRTC. However, if the clearing relates to a renovation project of an enduring nature that is integral to the dwelling, the costs of clearing the lot will qualify for the HRTC.
Reasons: Based on the 2009 budget documents, the renovation must pertain to land which forms part of a principal residence, and relates to a renovation project which is of an enduring nature and is integral to the eligible dwelling.
June 29, 2009
Dear XXXXXXXXXX :
Your Member of Parliament, XXXXXXXXXX , wrote on your behalf regarding the new home renovation tax credit (HRTC). Please accept my apology for this delayed reply.
You want to know if the cost of clearing the trees and brush from a large cottage lot will qualify for the HRTC. The proposed HRTC will provide 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 up to $1,350. The new HRTC will only reduce your federal income tax payable. If your non-refundable credits, including the HRTC, total more than your federal income tax, the Canada Revenue Agency (CRA) will not refund the excess as a rebate.
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 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 as 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.
In your case, the housing unit is a cottage on a sizeable wooded lot. Generally, land of one-half hectare or less would form part of the principal residence. Any portion in excess of the one-half hectare may be considered part of the principal residence if the individual establishes that the respective portion is necessary for the use and enjoyment of the housing unit. Expenditures incurred for land that does not form part of the principal residence will not qualify for the HRTC.
The clearing of trees and brush on its own would not likely qualify for the HRTC. However, if the clearing relates to a renovation project that is of an enduring nature and is integral to the eligible dwelling, such as laying sod or building a deck, the costs of clearing the lot will qualify for the HRTC.
You can find more information about the credit on the CRA Web site at www.cra.gc.ca/hrtc and on the Government of Canada Web page at www.actionplan.gc.ca/grfx/docs/hrtc_eng.pdf. I am enclosing a copy of the Government of Canada document for your convenience.
I trust that the information I have provided will be helpful.
Jean-Pierre Blackburn, P.C., M.P.
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