February 3, 2009
In their 2009 federal budget, the Conservative government looked to jump start a lagging economy through massive fiscal policy. A move that allowed them to address a number of infrastructure projects which had been languishing on the shelf for some time.
In an effort to induce Canadians to follow their lead, Finance Minister Jim Flaherty also included a $3 billion tax credit for homeowners conducting renovations this year. The hope is that homeowners will take advantage of the opportunity to tackle some nagging project they themselves have been putting off.
Credit claims under this provision can add up to $1,350. Claims are to be made on 2009 tax returns and cover the full gamut of renovations_anything not considered maintenance or furniture replacement_costing between $1,000 and $10,000. The credit is applicable to work, materials purchased or agreements reached between January 27, 2009, and February 1, 2010.
"The use of tax credits will make the program of interest to many Canadians who own their own home," said Canadian Real Estate Association president, Calvin Lindberg, in a press release. "But the success will be tied in part to the availability of savings or credit, since the expense has to be paid before the tax credit is issued."
The residential construction industry was one of the first to feel the pinch of this recession and the losses are starting to turn into bankruptcies. In the last week alone, Home Depot's parent company cut 7,000 jobs in the US and Giant Carpet and Flooring Ltd, the 40-year-old chain of Ontario stores, declared bankruptcy. If the tax cut meets the government's expectations, it should provide welcome relief to not just the renovation industry but manufacturers and retailers who depend on it as well. The Finance Department estimates that 80 per cent of the materials used in the Canadian residential construction industry are domestically produced.
One question on the minds of renovators is: what will this mean for the industry's black-market? It has been a long, uphill battle for licenced renovators to convince homeowners to choose credentials over a lower price. To be eligible for the tax credit, however, one would have to produce a receipt. This should drive business towards licenced renovators.
"All of these framing crews or finishers who were working in the new home business are now available, and so if they have a cell phone and a half-ton truck they are now a renovator," noted Robert Schulz, president of The Renovation Corporation and a member of the CHBA Renovation Council. "They might not have the business licences or the insurance that you need."
Sure, it will take more than a few $1,000 to $10,000 projects to make a difference in the bottom lines of mid-size or larger renovators, but when times are tough, every little bit helps.
For more information, visit Government of Canada Home Renovation Tax Credit web page.