9 February 2010 Ministerial Correspondence 2009-0348271M4 - 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: Does the hiring of a painter to paint an existing fence qualify as an eligible expenditure for the HRTC?

Position: Depends

Reasons: Eligible expenditures for the home renovation tax credit include only expenditures that relate to a renovation or an alteration of an eligible dwelling (including land) that is enduring in nature and integral to the dwelling. The hiring of a painter paint an existing fence is enduring in nature and integral to the eligible dwelling provided the fence is on land forming part of the eligible dwelling and qualifies for the HRTC. The renovation appears not to be in the nature of a repair that would be undertaken annually.

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Dear XXXXXXXXXX :

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

The legislation regarding the new HRTC has been enacted and is contained in section 118.04 of the Income Tax Act. As explained by Mr. Bryan Parker, Head, Departmental Correspondence Unit at the Department of Finance Canada, in his letter of November 4, 2009, the HRTC provides individuals with a temporary 15% non-refundable income tax credit on eligible home renovation expenditures for services received or goods acquired after January 27, 2009, and before February 1, 2010. However, expenditures for services received or goods acquired under agreements entered into before January 28, 2009, do not qualify for the HRTC. 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.

Under section 118.04, expenditures qualify for the HRTC 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 particular, you asked whether hiring a painter to paint an existing fence will qualify for the HRTC. Providing the above conditions are met, the hiring of a painter to paint an existing fence that is permanently attached to land that forms part of your eligible dwelling will qualify for the HRTC. Generally, land of 1/2 hectare (1.24 acres), including land upon which the individual's housing unit stands and any portion of the adjoining land, will be considered part of the individual's eligible dwelling if the individual owns the land. Please note that the cost of routine repairs and maintenance normally performed on an annual or more frequent basis will not qualify for the HRTC.

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.

Yours sincerely,

Keith Ashfield
Minister of National Revenue

George A. Robertson
(905) 721-5196
2009-034827