RENOVATIONS: Don't delay if you plan to use reno tax credit

From all indications on the political front this week, it's likely the Home renovation Tax Credit [HrTC] announced in the January 2009 federal budget will be implemented.

On Monday, Finance Minister Jim Flaherty tabled a detailed Notice of Ways and Means Motion to implement the tax credit and other measures outstanding from the budget. A new Section 118.04 is being inserted in the Income Tax Act to spell out the precise definitions of eligible dwellings and qualifying expenditures.

On Tuesday, CArP -- representing Canadians aged 45 or over -- said an overnight poll found two-thirds of its members do not believe the HrTC will fail to come into effect.

Nor, for that matter, do they want a fall election, and they support extensions to Employment Insurance. Of the 1,904 CArP members polled, 27% or 515 indicated they have taken advantage of the HrTC already with a further 24.9% or 475 indicating they plan to do so. Less than half -- 914 -- have not done so and do not plan to do so.

There would be a citizens' revolt if the renovation tax credit were revoked at the final hour. Our family committed to a project that was finished in August. We may have done so anyway but the knowledge we'd get a $1,350 tax credit next April (assuming $10,000 of work: it's computed as 15% of $9,000, the first $1,000 doesn't count) was a contributing factor to the timing.

If CArP's poll is significant, that's a lot of baby boom voters who would be extremely disgruntled if the measure didn't happen after they already committed the funds. Mind you, there is precedent for governments reneging on tax measures once the desired consumer behaviour has already been stimulated: think back to the private school tax credit implemented by the same Jim Flaherty when he was the Ontario Minister of Finance.

Once Dalton McGuinty got into power, the tax credit was promptly -- and retroactively -- revoked by the new Liberal provincial government.

The HRTC applies to work performed or goods acquired after January 27, 2009 and before February 1, 2010. For those sitting on the fence or waiting till it's official, time is rapidly running out. There are just over four months remaining and I'd suggest those who wait until the last minute may find themselves competing for a limited number of contractors who can perform the work.

If demand outstrips supply, prices will probably rise and all but negate the tax benefits. Besides, who wants such work done in the winter? Best to beat the rush and at least line up some quotes from suppliers who can implement the work before November. Those who are cautious can give the official go-ahead once it's definitely final.

Family members can share the credit. A dwelling is considered eligible if used for personal purposes and includes a house, cottage and condominium units.

The budget clarifies that "costs associated with such projects will be eligible for the credit, including permits, professional services, equipment rentals and incidental expenses."

(prepared by Jonathan Chevreau/National Post/Vancouver Sun)