11 February 2010 Ministerial Correspondence 2010-0354991M4 - Home Renovation Tax Credit - Flood Proofing a Home

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: Whether renovations to flood proof a home are eligible for the home renovation tax credit.

Position: Generally yes, provided other conditions are met.

Reasons: Expenditures for goods acquired and services received during the eligible period that are directly attributable to a qualifying renovation of an eligible dwelling and that are made or incurred by an individual will qualify for the HRTC.

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Dear XXXXXXXXXX :

The Honourable John Baird, Minister of Transport, Infrastructure and Communities, forwarded a copy of your correspondence to my predecessor, the Honourable Jean-Pierre Blackburn, which was received on January 18, 2010, regarding flood proofing your home. Mr. Baird indicated that you may be interested in knowing whether renovations to flood proof your home are eligible for the home renovation tax credit (HRTC).

The legislation regarding the HRTC has been enacted and is contained in section 118.04 of the Income Tax Act. 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 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.

Provided the conditions outlined above are met, the costs of flood proofing your home qualify for the HRTC. These costs could include installing a permanent sump pump system or waterproofing the foundation, as well as associated expenses, such as building plans, permits, professional engineering consulting services, and equipment rentals. Expenditures for lot grading and constructing permanent flood barriers also qualify, if this work was done on land that is considered part of the individual's eligible dwelling. Land of 1/2 hectare (1.24 acres) that includes the land upon which an individual's housing unit stands and any portion of the adjoining land is generally considered part of the individual's eligible dwelling.

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

Andrea Boyle
(613) 957-8971
2010-035499