27 November 2009 Ministerial Correspondence 2009-0340891M4 - 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: Are expenditures for renovating a late (deceased) brother's house eligible for the home renovation tax credit (HRTC)?

Position: Whether or not expenditures qualify for the HRTC must be resolved on the basis of the facts in each particular situation.

Reasons: The house must be an eligible dwelling of the individual incurring the expenditures at the time of the renovation. The expenditures must be enduring and integral to the dwelling.

XXXXXXXXXX

Dear XXXXXXXXXX :

The office of the Honourable James M. Flaherty, Minister of Finance, forwarded to me a copy of your correspondence regarding the new home renovation tax credit (HRTC). Please accept my apology for this delayed reply.

First, I would like to extend my condolences to you, your sister, and both your families on your brother's passing.

You want to know if expenditures for renovating your late brother's house are eligible for the HRTC. You also want to know who should make the claim.

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 Mr. Flaherty. 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.

You state that you and your sister have been renovating your brother's house and that he passed away in XXXXXXXXXX . Whether an individual can claim the HRTC in the year or not depends on each particular case. To answer your questions, the Canada Revenue Agency (CRA) needs more details like: when the expenditures were made, who paid for them, and who owned the home at the time of the renovation. Based on the information you provided, I can only offer the following comments.

If the renovations were made by your brother prior to his passing, and he owned the house at the time of the renovation and ordinarily inhabited it at any time after

January 27, 2009, the HRTC can be claimed on his 2009 personal income tax return for any eligible expenditures for work performed or goods acquired after January 27, 2009, that your brother paid.

If the renovations were made by other individuals after your brother's passing, a claim for the HRTC can only be made on the 2009 personal income tax returns of each of the individuals who owned the house at the time of the renovation and who ordinarily inhabited it at any time after January 27, 2009, and before February 1, 2010. The claim by a particular individual can only be made for the eligible expenditures for goods acquired or work performed before February 1, 2010, that were paid for by that individual.

If the renovations were made after your brother's passing and paid for by the estate of your brother that owned the house at the time of the renovation, each of the individuals who are a beneficiary of the estate and who ordinarily inhabited the house at any time after January 27, 2009, and before February 1, 2010, may be able to make a claim for the HRTC on their 2009 personal income tax returns. Generally, goods acquired or work performed before February 1, 2010, that the estate paid for will qualify as eligible expenditures for the individuals described above, if the expenditures are integral to the dwelling and enduring in nature. The estate must notify each individual in writing of their share of the expenditures.

A new schedule will be included in the 2009 personal income tax return that will allow taxpayers to list their own eligible expenditures and to calculate the amount claimed on a new line.

I would also like to bring to your attention that the individuals making such a claim can perform the work themselves. However, an eligible expenditure does not include the value of your own labour. An eligible expenditure does not include either expenditures for goods or services provided by a person not dealing at arm's length with the individual making the claim, unless the person is registered for the purposes of the goods and services tax/harmonized sales tax. For example, a sister and a brother, or two sisters, are not considered persons who deal at arm's length.

You can find more information on the HRTC on the CRA 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

Nancy Shea-Farrow
(905) 721-5226
2009-034089