Homeowners have short window to take advantage of renovation tax credit
If you've been putting off fixing your windows or replacing your kitchen cabinets, a new tax break might help you get the ball rolling.
CALGARY - Under the Home Renovation Tax Credit, introduced in the January federal budget, home improvements costing between $1,000 and $10,000 will be eligible for a 15 per cent deduction for the 2009 fiscal year.
But Canadians have a short window to take advantage of the HRTC, since it only applies to renos done between Jan. 27, 2009 and Feb. 1, 2010.
"Don't wait too long to make the decision because it might come and go before you get a chance to actually do anything," cautioned Cleo Hamel, a senior tax analyst with H&R Block in Calgary.
Hamel said she's been encountering clients who decided to start their home makeovers before Finance Minister Jim Flaherty announced the tax credit as part of the federal budget in late January.
"Unfortunately anyone who's already got a contract where they're already getting some work done, that's not going to count. So this has to be brand new contracts for renovation work after Jan. 27," she said.
Before homeowners pick up a hammer or put in a call to their contractor, they need to know which types of renovations count and which ones don't.
"The type of renovation has to have a lasting value on the home," Hamel said.
For example, installing all-new new windows, doors, floors and cabinets would count. Duct, carpet or furnace cleanings, a minor paint job or new appliances won't.
Even still, many of Hamel's clients are unclear about what types of work are eligible and which aren't.
"It's one of those things where as time passes we hope and anticipate the government will give us even more information leading into this and it will be easier for people to determine whether or not the work they're doing is going to count," she said.
"We're recommending that anybody who does any kind of work, keep all of your receipts."
The highest amount Canadians can claim under the HRTC is $1,350 if they spend $10,000 on a renovation.
It's a welcome break, but it really only helps homeowners who had already been planning renovations, said Adrian Mastracci, president of KCM Wealth Management in Vancouver.
"Make sure that you want to do it anyway, because the tax credit just reduces your outlay a little bit, but it doesn't pay for the whole renovation, unfortunately," he said.
"Just because you get a few more dollars off your income tax, that helps, but that shouldn't be the only reason to do this," he said.
In order to take advantage of the credit, people must actually live on the property that is being renovated. It's not for anyone who wants to make a few bucks fixing up property they're renting out to others, Mastracci added.
There are some compelling reasons for some homeowners to invest in renovations regardless of the tax credit.
Revamped doors, windows and insulation make the home more energy efficient and cut down on home heating costs.
And the changes could also improve the value of your home.
"Realtors will tell you that whatever you spend on your kitchen, you can actually recapture that and then some if you choose to sell your home," H&R Block's Hamel said.
"A $10,000 kitchen renovation could equate to raising the value of your home by $15,000 or $20,000. You may not be able to see the benefit as far as the tax credit at the time of doing it, but if you do sell the house it could be what gets you a higher selling price."
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