Canadian Contractor

John Bleasby   

Return of the Home Renovation Tax Credit?

Canadian Contractor

One of Harper's first promises in this election campaign is to re-introduce the Home Renovation Tax Credit (HRTC). The NDP and the Liberals aren't impressed.

Let the federal election promises begin! Prime Minister Stephen Harper came to Toronto yesterday and pledged that, if re-elected, he would re-boot and make permanent the renovation tax credit so popular a few year ago. Well… sort of… maybe.

Back in 2009, the Conservatives rolled out the Home Renovation Tax Credit (HRTC) as a temporary measure. Around one in every three households used the program, making it among the most popular of the party’s tax credits in the past, and one of the few that has been supported by both the Liberals and the NDP.

This time around the credit would be a 15 per cent annual credit on renovations between $1,000 and $5,000, but it comes with conditions.

First, it would depend on the economic conditions of the country, which are shaky at present. Harper predicted the tax credit would be introduced in the middle of his government’s next mandate.

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Second, while the original HRTC applied to renovation costs of up to $10,000, the ceiling for the permanent credit has been lowered to $5,000.

“For most Canadians, the family home is their biggest asset and their most significant investment in their future financial security,” Harper said. “I’m therefore very pleased to announce that to help make it more affordable for Canadians to adapt their homes to their changing needs and to maintain and increase those houses’ values, we will establish a new, permanent home renovation tax credit.”

The credit, which would apply to renovation work done on houses, cottages and condominiums owned for personal use, would help create jobs in the construction sector according to Harper, and pump billions of dollars back into the Canadian economy. The Conservatives estimate the permanent program would cost around $1.5 billion a year, or roughly half what the 2009 program cost.

Markham-Thornhill Liberal candidate John McCallum expressed dissatisfaction with the proposed tax credit.

“It’s not refundable. In other words, if you don’t earn enough income to pay tax you get nothing,” he said. “We believe it is totally wrong to offer this credit for everyone except those with low income.”

In an interview with the National Post, Mike Moffatt, an economist and assistant professor at the Richard Ivey School of Business who has provided economic advice to Liberal Leader Justin Trudeau, said that while the earlier home renovation tax credit made some sense, it was a temporary measure designed to stimulate a lagging economy at a time when the construction sector needed a boost. The plan Harper proposed Tuesday, on the other hand, would be permanent, phased in only if the economy was strong, and aimed at residential real estate, “the one sector of the economy that’s going gang busters,” Moffatt said.

“It seems really strange,” he added. “Normally if this was a form of stimulus, you would wait until the economy was weak and you would target sectors of the economy that are not doing all that well. ”

According to the consultancy group Altus, Canadian spending on renovations has grown 3.6 per cent, versus overall economic growth of just 1.6 per cent. Last year, home renovations accounted for 3.4 per cent of Canada’s GDP.

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3 Comments » for Return of the Home Renovation Tax Credit?
  1. Pockets Empty says:

    Ah, yes. The renovation tax credit. Two friends of mine played the game last time round. Their property taxes both increased by over $200, while all the other houses on their streets saw no increases. This is nothing more than a Government scheme. Nothing in this world is free. Just imagine how much money that credit cost my friends when you multiple it over the years, and also when a percentage increase down the road occurs. It is like the wound that will never heal. Slimy schemes like this by our Government make me want to buy my purchases across the line and keep within the max allowable tax free purchase I can bring back per trip. Pay all my trades cash under the table. But I want to support my Canadian retailers (there are still some left that are not all foreign owned, right?) so I do not purchase goods across the line. I do not pay my trades under the table because I understand that a certain amount of tax money is required to run the country (just not the insane amount that is being wasted). It is time for the Government to get out of our pockets and stop pretending to do us favours (and really stop when it is a hollow, easy to forget, election promise). “Harper, he’s just not ready”… oh no wait that is the fresh new young guy. Harper is past ready and very ripe.

  2. It’s about time. New home buyers get an HST rebate, why not renovation buyers? It’s a great tool to fight the so called “underground economy”. Reward those that pay taxes and play by the rules. What has Ontario done but add another layer of bureaucracy with the Ontario College of Trades and more costs with the mandatory WSIB coverage. Wait until we see what this new pension fund costs us.

  3. Keith says:

    Helps homeowners who CHOOSE to make improvements to their homes.
    Not forcing anyone to take advantage of it.
    Also keeps the “underground economy” from competing with honest tradesmen.

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