Home is where the money is - Money In Your Pocket

The Canadian real estate market hasn’t tumbled as much as it has in the United States, but it is hard not to be affected by the doom and gloom.

Perhaps sensing this, our federal government used its most recent budget to announce new and improved measures to help home owners and the construction industry.

First-time home buyers get a break with a new $5,000 non-refundable federal income tax credit that is worth up to $750 (15 percent of $5,000) on a qualifying home purchase with a closing date after Jan. 27, 2009.

Read Also

Producers face the reality of shifting grain price expectations

Significant price shifts have occurred in various grains as compared to what was expected at the beginning of the calendar year. Crop insurance prices can be used as a base for the changes.

For the purpose of this tax credit, purchasers and their spouses or common-law partners are considered to be first-time home buyers. They must not have owned and lived in a residential property in the year of the claim or the four preceding years.

First-time home buyers also get to use an additional $5,000 from their RRSPs for the purchase of a new home under the existing Home Buyers’ Plan because the budget increased the amount they could withdraw to $25,000 from $20,000.

The budget did not forget existing home owners. They received a new Home Renovation Tax Credit (HRTC), a temporary measure that applies only to eligible expenditures made between Jan. 27, 2009, and Feb 1, 2010.

This, too, is a 15 percent non-refundable tax credit for eligible expenditures on home renovation projects. It applies to expenditures between $1,000 and $10,000. This means the maximum tax credit each family unit can receive is 15 percent of $9,000, or $1,350.

For this credit, a family consists of you, your spouse or common-law partner and children who are younger than 18 throughout 2009.

It can be claimed on eligible costs applied to renovations made to one or more dwellings, including houses, cottages and condominium units owned for personal use.

If you earn business or rental income from part of your principal residence, you can claim full credit for only the expenses incurred for renovating the personal use areas of your home. Reshingling the roof on your home, for instance, will require you to calculate what portion of the expense relates to income-earning versus personal use.

Eligible expenses include labour and parts for projects such as finishing a basement, remodeling a kitchen or bathroom, installing new carpets or floors and painting a home’s interior and exterior.

Routine repairs and maintenance do not qualify. Neither does the purchase of home entertainment electronics, appliances and furniture. Expenditures must be incurred with contractors dealing at arm’s length to you unless the contractor is registered for GST. If you are a do-it-yourselfer, you cannot claim the cost of your own labour.

A welcome addition to the program is that the credit will not be reduced by entitlements under other government programs.

For instance, if you make an expenditure that improves the access to and use of your home by a handicapped family member that also qualifies for the Medical Expense Tax Credit, you are allowed to those expenses to claim both credits.

Larry Roche is a tax analyst with farm taxation and planning specialists Farm Business Consultants Inc. He can be contacted at fbc@fbc.ca or call 800-860-7011.