Federal Budget 2009Home Renovation Tax Credit The 2009 federal budget provides a temporary incentive for Canadians to implement new renovation projects or accelerate planned future projects.
The temporary HRTC provides a 15% income tax credit on eligible home renovation expenses for work performed or goods acquired after January 27, 2009 and before February 1, 2010.
The credit may be claimed for the 2009 tax year on eligible expenses over $1,000 but not exceeding $10,000 and will provide up to $1,350 tax relief.
Source: Canada’s Economic Action Plan Budget 2009 Jan 27, 2009
Examples of HRTC Eligible and Ineligible Expenditures*
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
Ineligible- Purchase of furniture and appliances (ex: refrigerator, stove and couch)
- Maintenance contracts (ex: furnace cleaning, snow removal, lawn care, and pool cleaning)
Home Buyers’ Plan - Changes to Withdrawal LimitsThe Home Buyers’ Plan (HBP) allows first-time home buyers to withdraw amounts from a Registered Retirement Savings Plan (RRSP) to purchase or build a home without having to pay tax on the withdrawal. Budget 2009 proposes to increase the HBP withdrawal limit to $25,000 from $20,000.
For HBP purposes, an individual is generally considered to be a first-time home buyer if neither the individual nor the individual’s spouse or common-law partner owned and lived in another home in the calendar year in which the HBP withdrawal is made or in any of the four preceding calendar years. Special rules apply to facilitate the acquisition of a home that is more accessible or better suited for the personal needs and care of an individual who is eligible for the disability tax credit, even if the first-time home-buyer requirement is not met. These rules will also be modified to provide the same $25,000 withdrawal limit.
Withdrawn funds must generally be used to acquire a home before October of the year following the year of withdrawal. Amounts withdrawn under the HBP are repayable in instalments over a period not exceeding 15 years. To the extent that a scheduled repayment for a year is not made, it is added to the participant’s income for the year. A special rule denies an RRSP deduction for contributions withdrawn under the HBP within 90 days of being contributed.
This increase in the HBP withdrawal limit will apply to the 2009 and subsequent calendar years in respect of withdrawals made after January 27, 2009.
Source: Canada’s Economic Action Plan Budget 2009 Jan 27, 2009
First-Time Home Buyers’ Tax CreditThe costs associated with purchasing a home, such as legal fees, disbursements and land transfer taxes, can be a particular burden for first-time home buyers, who must pay these costs on top of saving the money for a down payment.
To assist first-time home buyers with the costs associated with the purchase of a home, Budget 2009 proposes to introduce a First-Time Home Buyers’ Tax Credit—a $5,000 non-refundable income tax credit amount on a qualifying home acquired after January 27, 2009. For an eligible individual, the credit will provide up to $750 in federal tax relief starting in 2009.
It is also proposed that the First-Time Home Buyers’ Tax Credit be made available to existing homeowners in respect of a more accessible or functional home purchased by an individual eligible for the Disability Tax Credit (DTC), or for the benefit of a DTC-eligible person who is related to the individual purchasing the home.
Source: Canada’s Economic Action Plan Budget 2009 Jan 27, 2009