Home renovations tax credit and condo owners

With just under three months left for the Home Renovation Tax Credit, the Canada Revenue Agency has released specific details on how condo dwellers may take advantage of the credit.

The credit was, without a doubt, the most popular item in the 2009 federal budget. It allows each family to claim a 15% non-refundable tax credit for eligible renovation expenses made to their dwelling. The credit applies to any amounts spent over $1,000, up to a maximum of $10,000, producing a maximum credit of $1,350.

The $10,000 expenditure limit is for all personal dwellings combined, including a home, cottage or condo unit.

Legislation to implement the credit was released at the end of September and is now winding its way through Parliament.

In a typical condo arrangement, each condo-unit owner pays a monthly maintenance fee, which typically goes into the condo corporation's general or reserve fund, from which the condo corporation would pay contractors' renovation bills on behalf of the unit owners.

Note, however, that since the credit is only available to individuals, not corporations, the condo corporation is not entitled to the credit. Instead, the draft legislation provides that a condo owner can claim the credit for qualifying renovations made on his or her own unit, as well as for his or her share of renovations of the common areas made by the condo corporation.

Last week the CRA clarified the documentation requirements to support claims for renovations made to the common areas of a condo building.

The documentation, which can be in the form of a letter from the corporation signed by an authorized individual, should include the amount paid, the name of the contractor (and, if applicable, the GST/HST number), a description of the work performed, the dates when the work or services were performed and the specific portion of the common renovation expenses that have been allocated to you.

But what if you are merely renting a condo or apartment and decide to do some renovations that you pay for personally?

You are out of luck, says the CRA. In a separate technical interpretation released last week, the CRA, not surprisingly, confirmed that tenants are not entitled to claim the home renovation credit since a tenant does not personally "own" the eligible dwelling.

One final general reminder -- although the deadline for the credit is Jan. 31, 2010, the CRA has stated that as long as any materials you purchase to be used in a renovation are acquired by this deadline, they will qualify for the credit, even if they are installed after January 2010.

The same, however, does not hold true for labour expenses, as only work completed before February 2010 will qualify for the credit, even if the amount is prepaid.

(prepared by Jamie Golombek, Tax Expert/Financial Post)