Dos and don'ts of the Home Renovation Tax Credit

By: Pedro Allais, Canwest New Service, February 27, 2009

The Home Renovation Tax Credit plan is part of the federal government's aim to inject $3-billion to stimulate the economy. It has met with a lot of enthusiasm -- but also with a lot of questions.

The plan seems simple enough at first glance: Spend up to $10,000 on renovations and construction on the family home, and you get a tax credit of 15 per cent back, up to a maximum of $1,350. It's a credit, so it reduces the amount of federal tax you have to pay; it doesn't mean you get a cheque for $1,350.

The plan will be administered by the Canada Revenue Agency.

The plan encourages homeowners to open their wallets with the promise of a reduction on personal income taxes paid next year.

"It's money in the pocket," says Ian B. Lawson, a certified general accountant who operates a practice that bears his name. "It's a win-win situation for homeowners and legitimate, tax-paying businesses."

He notes that the incentive is also a boon to the Canada Revenue Agency, as homeowners will be keen to use legitimate contractors who can supply invoices for work performed. Operators of unlicensed, non-tax-paying companies or people who ask for payment under the table will likely see their business suffer.

"It will definitely affect the underground economy," Lawson says. "It's not good news for those in the building trades who don't declare income."

For more information, visit www.cra.gc.ca or call 1-800-959-8281.