Most people associate the Canadian government’s Home Renovation Tax Credit (or HRTC) with detached family homes and larger properties; rarely do they think about the investments they own, or if they do, the investment condos.
What is the HRTC?
In the government’s own words:
Under proposed changes, the HRTC is a non-refundable tax credit based on eligible expenditures incurred for work performed, or goods acquired, after January 27, 2009, and before February 1, 2010, under an agreement entered into after January 27, 2009. The HRTC can be claimed when filing your 2009 tax return.
The HRTC can be claimed for renovations and alterations of an enduring nature and that are integral to the eligible dwelling (such as your home or cottage) or the land that forms part of the eligible dwelling.
How is the HRTC calculated?
The 15% non-refundable tax credit can be claimed on eligible expenditures of more than $1,000 but not more than $10,000. The maximum tax credit that can be claimed to reduce your federal income tax is $1,350. However, if the total of your non-refundable tax credits is more than your federal income tax, you have no federal income tax to pay, and you will not receive a refund for the HRTC.
Condo owners can claim a portion of improvements made to their building between Jan. 27, 2009 and Feb. 1, 2010, as long as they were at least partially responsible for paying for the upgrades.
Here’s how it works:
Assuming each condo owner pays a monthly fee to a condo corporation, repairs or renovations completed and paid for with that money should count toward the HRTC. The condo corporation is simply paying for these goods and services on behalf of all of the unit owners.
Condo corporations are unable to claim the credit because it is available only to individuals, so it’s up to each person to claim his or her portion.
Therefore, on their 2009 taxes, condo owners can claim the credit for renovations to their own unit – similar to what would be done in a detached home, for example – as well as their share of any renovations to common areas paid for by the condo corporation.
This could include anything from new windows installed in your building to a redesigned lobby area or improved landscaping.
Add these shared costs with renovations you may have done to your individual unit (bathroom or kitchen upgrades, new fixtures, painting) and you could significantly increase your credit.
Canada Revenue Agency guidelines for condo owners indicate that improvements made to common areas will qualify if:
– You own your unit. Renters are out of luck, even if they pay similar monthly fees.
– "The expenses would be eligible expenses if the common areas were treated as an eligible dwelling" – if new furniture wouldn’t count in a detached home, it won’t count in a condo either.
– Your condo corporation has notified you of your share of the expenses.
As a reminder, the tax credit applies to renovation costs over $1,000 and under $10,000, so if you spent a few hundred dollars on your own unit and the condo corporation spent a few hundred more on your behalf, that may be the difference between getting a return or not.
Contact your condo corporation and ask them for a report on your proportional share of the work done to the complex. If you own several investment condos, your savings can be substantial.
For more info on investing in a condo in Kitchener Waterloo, Ontario, contact me at 519.772.4376 or send me an email today