By: Kim Arnott
For a homeowner, a new front door or a fresh paint job may be a simple investment that pays off in terms of quality of life and long-term property value. Multiply that single small upgrade by millions, however, and what you get is myriad new job opportunities for contractors and a strong boost to Canada’s economy.
Last January, the Conservative government introduced a temporary Home Renovation Tax Credit (HRTC) as part of a federal economic stimulus package. For homeowners undertaking renovations and repairs priced between $1,000 and $10,000 prior to February 1, 2010, the 15 percent credit can result in a savings of up to $1,350. At the time the tax credit was enacted, the government predicted 4.6 million Canadians would take advantage of the savings and undertake projects ranging from roofs and landscaping, to replacing furnaces and adding insulation. A few weeks later, a survey commissioned by Lowe’s Canada found one in five Canadians more likely to undertake renovations over the next 12 months as a result of the HRTC.
Those predictions appear to be panning out, with contractors across the country agreeing that Canadians seem to be keen on taking advantage of the tax credit. Stephen Hamilton, a policy analyst with the Ontario Home Builders’ Association (OHBA), says renovators across the province are seeing a lot of consumer interest and a spike in demand for smaller jobs. Hamilton says anecdotal evidence suggests the credit is having a positive effect on the industry.
“With the help of the big box stores really promoting [the HRTC], people are catching on,” adds Ottawa renovator Mike Martin, who chairs the Ontario Renovators’ Council. “A lot of the guys are saying that it’s been impacting on a lot of small jobs, which is great. It’s been good for the economy.” Martin says the credit has had a positive impact across the country, helped to keep the renovation business in reasonably good financial shape and encouraged the use of legitimate tradespeople rather than under-the-table contractors.
Deborah McLean, marketing manager for Beverley Hills Home Improvement in Hamilton, Ont. agrees the tax credit seems to be spurring activity in the renovation business. She says her company frequently fields phone calls from people with questions about how they can take advantage of the credit. “I don’t know whether it makes a ton of difference to the final decision, but it is putting the consideration in people’s minds,” she says. “It has them thinking about having work done.” From plumbers and roofers, to landscapers and architects, almost every business in the home renovation industry can entice clients with savings that will reduce next year’s tax bill. Like many companies, Beverley Hills Home Improvement has tried to leverage the tax credit to drive sales. Along with simply advertising the tax credit, the company has offered a number of related special promotions, including a deal that matches the credit customers are eligible to earn.
Homeowners can claim the tax credit for work that is done on a house, cottage or other dwelling that they or their families personally occupy. Eligible expenses for the credit include the cost of labour and professional services, building materials, fixtures, rentals and even permits. Expenditures on multiple properties or repairs can be combined, but the credit cannot be used for properties or areas of properties that are used to generate rental or business income. And only one credit per family, for work up to $10,000, can be claimed.
All work and goods must be purchased and completed between Jan. 27, 2009 and Feb. 1, 2010. In the case of condominiums and co-operative housing corporations, an individual's share of renovation work done to common areas will qualify for the tax credit. The condo corporation is simply required to issue a letter to residents indicating their portion of any shared expenditure that would qualify for the HRTC, and then maintain appropriate documentation of the work.
To ensure homeowners can claim the tax credit, contractors need to provide customers with invoices and receipts that clearly identify their company names and addresses, and if applicable, their GST number. Documents must also supply detailed information on the type and quantity of goods purchased or services provided, including the date and location where the work was performed.
Government Incentives Prompt Canadians to Renovate: One in Five Canadians More Likely to Renovate Thanks to New Home Renovation Tax Credit
A temporary tax credit may be just what it takes to spur Canadians into action when it comes to home renovation projects. According to an online survey commissioned by Lowe’s Canada, one in five Canadians say they are more likely to undertake home renovations before February because of the Home Renovation Tax Credit (HRTC) introduced in the last federal budget.
The survey, conducted by Angus Reid Strategies shortly after the federal government’s January 2009 announcement of the HRTC, indicates the 15 percent tax credit may be successful in stimulating the economy and encouraging consumer spending. Homeowners that spend between $1,000 and $10,000 on eligible home renovation expenditures between January 27, 2009, and February 1, 2010 can claim up to $1,350 in tax credits.
The challenging economy doesn’t appear to be putting a damper on home renovation projects, with 47 percent of Canadians reporting that they expect to renovate prior to February 2010. Of this group, more than one-third (37 percent) said they will spend more than $5,000.
Almost all Canadians expect to spend enough to qualify for the HRTC, with only 9 percent planning to spend less than $1,000. The largest group (28 percent) expects to spend between $1,000 and $ 2,500, while an additional 26 percent intend on spending between $2,501 and $5,000. The survey found that 11 percent planned to spend between $5,001 and $7,500, while 10 percent expected their renovations to cost between $7,501 and $10,000. About 16 percent reported plans to spend more than $10,000 on renovations in the 12 months following the survey.
Quality of life is driving home renovation projects, with 64 percent of Canadians saying they are renovating for personal or family enjoyment of their property. Increased resale value is driving 12 percent of Canadians to undertake home renovations, while improved energy efficiency is the reported motivation for 11 percent of those planning home renovations this year.
A fresh coat of paint ranks as the most popular renovation project, with 41 percent of Canadians reporting that they plan to paint the interior or exterior of their home. The survey found the next most popular projects were bathroom renovation (32 percent), kitchen renovation (28 percent), new carpet or hardwood flooring (26 percent), new windows (21 percent) and building an addition, deck, fence or retaining wall (20 percent).
Energy Efficient Renovations Rewarded with Tax Credit and Grant Program
With winter in the long-term forecast, Canadians are turning their thoughts toward nestling snugly in their family rooms. However, rising energy bills are making it increasingly expensive to stay cozy. Before the cold blows in, savvy renovators can bolster sales by showing clients how they can stay warm and save money by taking advantage of both the Home Renovation Tax Credit (HRTC) and the federal ecoENERGY Retrofit - Homes program.
Under the ecoENERGY program, property owners can be eligible for federal grants of up to $5,000 on retrofits that improve a home’s energy efficiency. Add in a tax credit of up to $1,350 under the HRTC, along with the potentially significant savings on utility bills, and it’s not hard to demonstrate how home improvements can quickly pay for themselves.
“It’s a no-brainer really,” says North Vancouver renovator John Friswell, who chairs the Canadian Renovation Council. His company, Canadian Constructors International Ltd., encourages clients to start renovation projects by undertaking the required energy audits that will make them eligible for the ecoENERGY program. “You don’t have to do a heck of a lot of work to pay for the audit.”
While almost all home renovation work qualifies for the HRTC, items like new furnaces, hot water heaters, windows or insulation can create energy savings that will provide clients with grants through the ecoENERGY program. Knowledge of the program appears to be growing, with the federal government announcing that an average of more than 21,000 homeowners per month completed the mandatory pre-retrofit audit during April and May 2009—an increase of more than 75 percent compared to April 2008.
Deborah McLean, marketing manager for Beverley Hills Home Improvement in Hamilton, Ont., agrees that consumers are becoming increasingly concerned with energy efficiency. Informal studies that her firm has undertaken show that clients considering window or door replacements are motivated by both energy efficiency and home appearance. Ongoing company promotions that remind homeowners how they can save money while improving both energy efficiency and home appearance are good incentives to sales, says McLean. “Everybody’s looking for any little bit.”