Tax credit offers reno incentive
You’ve just bought a recreation property and the house could use some serious updating, or perhaps the family cabin that has been serving you well for many years is starting to show its age.
Whether it is the former or the latter circumstance you find yourself in, it might be time for some renovations, and the timing couldn’t be better, thanks to the Canadian Government’s Home Renovation Tax Credit (HRTC).
Although it has received a lot of publicity, many people don’t realize that the credit can also apply to improvements you make to a vacation home, cabin or cottage.
Joanne Gorsalitz, communications manager with the Calgary Tax Services Office, says as long as your recreational property is reserved for personal use and not rented out, than it is eligible under the program.
Gorsalitz says the 15 per cent non-refundable tax credit is available on expenditures of more than $1,000 and up to a maximum of $10,000.
The maximum is per family, not per property, so the $10,000 can be shared between your primary residence and vacation property if you chose. The maximum available tax credit would be $1,350, which is 15 per cent of $9,000, since the first $1,000 is not eligible.
To qualify for the HRTC, the improvements you make to your recreation property must have an enduring nature to them, says Gorsalitz.
Some examples of eligible improvements, which can be found on Canada Revenue Agency’s website, include renovating a kitchen, bathroom or basement, new carpet or hardwood floors, septic systems, wells, adding deck or permanent hot tub or installing solar panels.
Examples of ineligible expenses include things, such as purchasing new furniture or appliances, cleaning of carpets, lawn care, or buying new curtains and drapes.
The expenses related to a project can include materials, permits, labour and professional services, fixtures and rentals.
However your own labour cannot be calculated as an expense.
She says the HRTC program covers projects which began, or were entered into contract for, after Jan. 24, and that are completed and paid for before Feb. 1, 2010.
People should keep all the receipts for a project and then report the total on their 2009 personal tax return.
A new line will be added to the T1 General Tax Forms and the amount will appear on Schedule 1 as a non-refundable tax credit.
More information is available at www.cra-arc. gc.ca, the Canada Revenue Agency’s website.
Just what renovation projects you should undertake at your recreation property can depend on a lot of things, but you should keep in mind some basic advice about renovations in general.
Bruce Hopkins, general manager of the Remodelers Group of Companies in Calgary, says it’s always a good idea to consider the value of a property and its location before deciding how much to spend on a renovation.
Hopkins says it wouldn’t make sense to do $100,000 of improvements to a property in an area that is not highly sought after. But if your recreation property was built long before an area became popular, it might lend itself well to a more intensive renovation, to bring it up to the increased value of the neighbourhood.
For many renovations, people decide to target a few areas of a home, which are in need of improvement.
Hopkins says kitchens and bathrooms are the two most popular areas to renovate, as they are often a major consideration when people are looking to buy a home.
However he says the return on investment for most renovations is considered to be about three to five years, so if you are planning to sell your property in the near future, you might want to carefully consider which renovations to undertake.
And before you go ahead with a project, it’s important to make sure you are dealing with a reputable company.
He says while many people ask for references, even better is if you can visit homes that the company has renovated, see for yourself the workmanship, and even talk to the homeowners.
The return investment for most renovations is about three to five years, so consideration has to be given as to what you want to renovate.