Homeowners win in Flaherty's budget
OTTAWA - Renovating your house or buying a first home just got a bit easier, after Finance Minister Jim Flaherty introduced a budget with millions of dollars designed to jump-start Canada's construction and housing sectors.
Some of the biggest winners will be homeowners who had been planning to spruce up their houses or make them more energy efficient. Under Flaherty's plan, starting today homeowners can get a 15% tax credit of up to $1,350 for eligible renovations to their home or cottage. Renovations must exceed $1,000 but the credit tops out after $10,000 of work.
However, the plan only runs until Feb. 1, 2010 and not everything is eligible. While jobs such as painting your house, renovating a kitchen or adding an addition or desk qualify, the annual maintenance that you would do every year doesn't. Installing new windows counts but not washing the ones you already have.
Under the measure that is expected to cost the government $3 billion, you can do the work yourself or hire someone to do it for you. But if you do the work yourself, you won't be able to claim the cost of your labor. If you hire someone, they have to have an arm's length relation to you unless they are registered for the goods and services tax.
Anyone in the family can claim the tax credit - it doesn't have to be the person earning the lowest income - and the credit can also be shared among family members. The government estimates that 4.6 million families will benefit from the home renovation tax credit.
Quietly, officials also hope it could have also have another impact. The fact that homeowners have to submit receipts to qualify for the tax credit could reduce the amount of home construction work being done in the underground economy.
In some cases, homeowners will be eligible to claim deductions for some spending twice. For example, renovations eligible under the Medical Expense Tax Credit can also be claimed under the home renovation tax credit program.
The home renovation tax credit can also be claimed for work that also qualifies for the ecoENERGY Retrofit program. Under the retrofit program, which is expected to cost the government $300 million over two years, homeowners can get grants of up to $5,000 to help pay for improving the energy efficiency of a home or building such as increasing its insulation or upgrading a furnace.
The government has also earmarked another $15 million to nudge Canadians with RRSPs into buying homes. Starting today, you can withdraw $25,000 tax free from your RRSP to buy or build a first home - up from $20,000.
Low-income Canadians haven't been forgotten. The government will spend $2 billion over the next two years to renovate, retrofit and build social housing for seniors, those with disabilities as well as on First Nations reserves and in the North.
By ELIZABETH THOMPSON, SUN MEDIA
