Government Funds Renovations--Do It This Year

The Federal Government of Canada passed into law the Home Renovation Tax Credit as part of the last budget ratified in the House of Commons. The measure implemented a temporary 15-per-cent Home Renovation Tax Credit (HRTC) to provide approximately $3 billion in tax relief to an estimated 4.6 million Canadian families.

The HRTC is intended to encourage investments in Canada's housing, as well as provide employment for trades-people and boost sales for those who make and sell building products. It applies to eligible home renovation expenditures for work performed, or goods acquired, after January 27, 2009 and before February 1, 2010. Work committed to after January 27, 2009 will qualify.

The 15-per-cent credit may be claimed on the portion of eligible expenditures exceeding $1,000 but not more than $10,000. It will provide up to $1,350 in tax relief to the tax payer.

There are two things that must be done in order to receive the tax credit. One must retain receipts for the eligible expenses (they do not have to be sent in to Revenue Canada) and one must also claim the deduction on the year-end tax filing for the period.

This is an example of HRTC eligible and ineligible expenses.

Eligible

• Renovating a kitchen, bathroom, or basement

• New carpet or hardwood floors

• Building an addition, deck, fence or retaining wall

• A new furnace or water heater

• Painting the interior or exterior of a house

• Resurfacing a driveway

• Laying new sod

Ineligible

• Furniture and appliances (refrigerator, stove, couch)

• Purchase of tools

• Carpet cleaning

• Maintenance contracts (furnace cleaning, snow removal, lawn care, pool cleaning, etc.)

The HRTC can be claimed by homeowners for renovations and enduring alterations to a dwelling, or the land on which it sits. A dwelling will generally be considered eligible for the credit if it is used for personal purposes, such as a house, cottage and condominium unit.

Benefits of the HRTC—Example

Greg and Karen, a couple who have a son getting married this year, have decided to upgrade their home so that wedding guests who stay with them will have a fresh place to live while they visit the province. Greg and Karen paint some of the rooms, upgrade the deck, stain the house and install new flooring throughout the home in 2009.

It cost them a total of $10,000 in expenditures. After taking into account the $1,000 minimum threshold, a 15-per-cent credit will be available on $9,000 in eligible expenditures, providing tax relief of $1,350.

When you consider that in Newfoundland the HST charged on all goods and services is 13%, one can quickly see that the HRTC roughly computes to an amount similar to a wavier of HST for eligible expenses. The amount won’t buy you a new car or a trip down south but the way Greg and Karen see it, “Its money better in their pockets than being squandered by the government on some futile public inquiry.”

R. Greg Osmond is a Platinum Award winning Realtor serving St. John’s and surrounding areas, Newfoundland and Labrador for over 20 years and can be reached at 709-895-2500. Visit http://www.rgregosmond.com/ for further information.

When Canadians Move, Home Sales Create Jobs

In April of this year, CMHC reported that the resale housing industry in Canada has generated more than 202,000 jobs and an average of $22.3 billion annually in various economic spin-offs in the period from 2006 and 2008. As a point of interest, each residential MLS® transaction has generated an average of $46,400 in additional consumer spending during this period. This includes the purchase of furniture and appliances, moving costs, renovations, services, and taxes.

The study suggests that the economic impact of each MLS® sales varies by province or region, from a high of $60,200 in British Columbia to $28,925 in Atlantic Canada. The report notes that spending relates to the cost of moving from one home to another and for renovations after moving in – it does not include any renovation expenditures by sellers to prepare properties for sale. It seems likely that this would add meaningfully to the total expenditures incurred. In my experience, there are not many who put their home on the market without spending at least $1000.

There is no doubt that Canadians on the move continues to be one of the major engines leading to job creation and economic prosperity. Many home buyers will typically buy new appliances or furnishings, and renovate in various ways to tailor their home to their specific requirements. All of this activity helps keep the money flowing throughout the economy. This indicates that if people stopped moving, the economy would slow significantly and many jobs would be lost.

In my next post, I plan to tell you how to save money by investing in home renovations before you list your home. People who spend money on their home in order to prepare it for the market can save thousands of dollars by doing two simple things. Come back soon and get the truth about renovation expenses. Or if you prefer, subscribe to my blog now and receive any updates as soon as they are posted.

R. Greg Osmond is a Platinum Award winning Realtor serving St. John’s and surrounding areas, Newfoundland and Labrador for over 20 years and can be reached at 709-895-2500. Visit http://www.rgregosmond.com/ for further information.