New reno tax credit a money-maker?

Yesterday's budget announcement (get the full details here) included a few incentives for first-time home buyers and renovators.

If the budget passes, first-time buyers will be eligible for a 15 per cent tax credit to help with closing costs — such as legal fees and land-transfer taxes. The credit will apply to up to $5,000 in costs, and, to a maximum of $750, will come off of taxes owing. Additionally, first-time buyers can borrow up to $25,000 per person from a RRSP without paying tax or interest if the money is repaid over 15 years.

Much is being made of the temporary reno tax credit. (Government details on the credit are here.) Homeowners (renters aren't eligible) can get a 15 per cent tax credit — up to $1,350 in tax relief — on projects completed by Feb. 1, 2010.

Not all projects are eligible — that new home theatre system for the Super Bowl just won't cut it, nor will routine repairs and maintenance. The credit would apply to improvements such as kitchen, bathroom or basement renovations or building an addition or deck.

In an interesting twist, the Star's Ellen Roseman writes in her column that the reno tax credit will "be a money-maker for the federal government."

She writes that the government could gain tax revenue and a paper trail for home improvements that were previously done under-the-table. To qualify for the tax credit, homeowners must supply receipts for the work done.

She also writes that the credit is unlikely to spur major spending, saying it is unlikely to encourage new projects among people concerned about job security. Rather, she says, it will likely only speed up projects that were already planned.

On thestar.com, 62 per cent of respondents said the credit won't persuade them to fix up their home. Thirty-two per cent said it would spur home improvements.

What do you think? Will the tax credit encourage you to take on a new project? Could this become a government money-maker?

Comments

[Alan Rego]

I'm likely to go in for a high-efficiency furnace. I'd been thinking about it for a while, and the new tax credit is an incentive to get it done.

My concern is that I'll get the tax credit only next May/June, which is 16 months away. So, I guess I'll wait to get this work done next fall. It would have helped if the government were to provide a quicker refund, say within a month after bills were submitted.

[cottagegirl]

Cottage Life magazine editor Penny Caldwell has also written on this topic today, with a look at how this impacts cottagers who are considering their projects for the 2009 season.
www.cottagelife.com/pennysblog

[Yvonne]

This could be a good investment for many homeowners IF they can find a contractor in their area, particularly in rural areas, who will not take advantage of the situation, realizing that they might be able to charge more for the job because of the tax credit the homeowner would be able to receive.