2 October 2009 Ministerial Correspondence 2009-0337291M4 - Eligible expenditures- home renovation tax credit

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: Do the costs incurred by cottage owners to install the main hydro line, the subdivision feeder line and the substation to their residences qualify for the HRTC.

Position: Generally, No

Reasons: The majority of the construction costs will occur on land not forming part of the eligible dwelling. The costs of installing the main hydro line, the substation and a portion of the subdivision feeder lines will not qualify for the HRTC. However, the cost of installing the subdivision feeder lines on land forming part of the eligible dwelling will qualify for the HRTC.

XXXXXXXXXX

Dear XXXXXXXXXX :

The office of the Honourable James M. Flaherty, Minister of Finance, forwarded to me a copy of your correspondence, which I received on August 13, 2009, concerning the new home renovation tax credit (HRTC). In particular, you would like to know if the construction costs paid by cottage owners to install a main hydro line, subdivision feeder lines, and a substation would 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.

Based on the information provided, it appears that only part of the subdivision feeder lines will be installed on land forming part of the eligible dwelling. Generally, land of one half hectare or less will form part of the eligible dwelling. Therefore, the costs of installing the main hydro line, the substation, and much of the subdivision feeder lines will likely not qualify for the HRTC. Only the costs of installing the subdivision feeder lines on land forming part of the eligible dwelling will qualify.

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.
Minister of National Revenue

George A. Robertson
(905) 721-5196
2009-033729