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Home Renovation Tax Credit (HRTC)
GST/PST Harmonization

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# Wednesday, 29 April 2009
Wednesday, 29 April 2009 20:00:46 (GMT Daylight Time, UTC+01:00) ( General Life )
Under the proposed taxation changes, Canadians can now claim a non-refundable tax credit on their 2009 tax return based on expenditures (must be eligible) incurred for labor performed and/or goods acquired for home renovations. The dates must fall between January 27, 2009 and before February 1, 2010 in respect of an eligible dwelling.  The HRTC is applicable to eligible expenditures of more then $1,000 but not more than $10,000; this will result in a maximum credit of $1350 ($10,000 - $1000) x 15%).

In order to determine if you are eligible for the HRTC consider the following factors:

•    The dwelling must qualify; any dwelling that you own and is used either by you or your family can qualify, including your home or cottage.
•    Eligibility for the credit is family based; a family will be allowed a single credit that may be shared within the whole family. If 2 or more families share the ownership of an eligible dwelling, each family will then be eligible for their own separate credit, each up to $1,350. This will be calculated on their respective eligible expenditures.
•    The expenditures incurred in relation to a renovation/alteration to an eligible dwelling (or the land that forms part of the eligible dwelling) must be of an enduring nature and integral to the building.
•    Expenditures must have been incurred after January 27, 2009 and before February 1, 2010, according to agreement entered info after January 27, 2009.

An eligible dwelling must be a housing unit that is eligible to be an individual's principal residence for the individual or one or more of their family members between January 27, 2009 and February 2010. It is eligible where it is owned by the individual and ordinarily inhabited by same individual, spouse, common-law partner, and/or their children. If a portion of the home is rental property (i.e. basement), only renovations that are done to the family's personal space will be eligible for this credit. If renovations are made that are considered common areas (i.e. roof) then the expenses will be divided between personal use and income earning use.

As all expenses must be supported by receipts, so make sure to securely save these items should they be required. Documentation like agreements, invoices and/or receipts must clearly identify the type and quantity of the goods purchased, and/or the services provided. Make sure the information you intend on submitting has:

•    Information that clearly identifies the vendor as well as their business address. If they have a GST/HST registration number, make sure that is included.
•    Description of the goods and the date in which they were purchased.
•    The date of when the goods were purchased, and/or when services were performed.
•    Description of the work performed; make sure the address of the dwelling is included.
•    The amount of the invoice and proof of payment. Receipts and/or invoices must indicate paid in full or be accompanied by other proof of payment, i.e. canceled cheque, credit card statement.

Eligible expenditures include, but are not limited to:

•    Kitchen, bathroom, basement renovations;
•    New carpeting and/or hardwood flooring;
•    New additions, i.e. garage, deck, shed, fence;
•    Re-shingling of a roof;
•    New furnace, boiler, fireplace, wood stove, water heater, water softener;
•    Painting of exterior and/or interior of home;
•    Adding a new driveway or resurfacing of a previous driveway;
•    Window coverings that are directly attached to the window frame, whereby the removal would alter the nature of the dwelling;
•    Laying of new sod;
•    In ground or above ground swimming pool;
•    Fixtures such as lights, fans;
•    Cost of permits, professional services, equipment rentals.

A worksheet is provided on Revenue Canada's website, as well as more detailed information regarding this tax credit.

Comments [1] | | # 
# Wednesday, 08 April 2009
Wednesday, 08 April 2009 14:26:28 (GMT Daylight Time, UTC+01:00) ( General Life )
Starting July 1, 2010 Ontario will have a harmonized sales tax. This harmonized tax will replace the existing Provincial Sales Tax (PST) and the Goods and Services Tax (GST). Currently the GST is 5% and the PST is 8%; the combined sales tax will be 13%. While some items may not increase in price, many items that have been exempt from sales tax will no longer enjoy that exemption. The province of Ontario says that implementing a single sales tax will bring Ontario into line with what they call the most efficient form of sales taxation around the world. The finance ministry claims that this combined tax will reduce the cost of goods that Ontario exports, thus in turn making the province more competitive as well as boosting the economy.

Consumers in Ontario will have to pay tax on products that have traditionally been exempt, such as gasoline, heating fuels and electricity. Services such as haircuts, club and gym memberships and taxi fares have also been exempt in the past, but will be taxed starting in 2010. Childrens clothing, footwear, car seats/car booster seats and diapers will remain exempt from the provincial portion of the new tax, as well as feminine hygiene products and books. Basic groceries, prescription drugs, medical devices, rent and/or condo fees will remain exempt from both the GST and the PST. The purchase of resale homes will remain exempt from the PST; real estate transaction fees will be taxed however. Traveling by air and train will be more expensive as well due to the new blended tax.

The Ontario Chamber of Commerce estimates that this fully blended taxation system will cost consumers approximately 905 million dollars per year in additional sales tax. The GST and PST tax bill for companies however, is estimated to decrease by 1.6 billion dollars annually. Under the current taxation laws, business are not allowed to deduct PST from the costs of materials and other purchased products; this cost is traditionally assumed to be passed along to the consumer. The blended taxation will allow these companies to claim tax credits for these purchases, potentially saving them 3 billion dollars per year. The Canadian Federation of Independent Businesses says that this new harmonization will save businesses 100 million dollars per year in reduced 'red tape'. They will also save a further 500 million annually on the costs of administering a single tax as opposed to the 2 taxes. The Ontario Real Estate Association claims that this tax merger will add more than $2,000 to the cost of real estate transactions, which will hurt the resale home market, potentially prolonging the housing industry’s recovery from the current economic crisis.

Household expenses are predicted to rise in this new taxation system. In order to help Ontario families combat this expense, the province says it will be offering 10.6 billion dollars worth of tax relief over the next 3 years in the following manner:

•    Cash payments with a maximum of $1,000 in 2010 and 2011 for families who earn less than $160,000 per year;
•    A permanent $260 refundable sales tax credit for low and middle income adults and children;
•    An enhanced refundable property tax credit for low and middle income homeowners and tenants;
•    Exemption from the blended tax for new homes under $400,000, newly constructed homes with a worth between $400,000 and $500,000 will be eligible for a partial rebate;
•    1.1 billion dollars in personal income tax cuts.

Ontario's NDP as well as Conservative parties oppose this new taxation system. The NDP claims that the single sales tax method will leave Ontario families carrying the burden with higher household expenses, especially at a time where job losses are occurring. The Conservatives ideally are in favor with the harmonization, but say that this is the wrong time for Ontario to be raising taxes.

Comments [2] | | #