Financial Planning, Investment Counselling, Tax and Accounting

Contents

Home renovation tax credit
CPP changes
Ottawa house prices

Home renovation tax credit

To stimulate economic growth and encourage Canadians to invest in improvements to their homes, Budget 2009 proposes a temporary Home Renovation Tax Credit (HRTC). Individuals will be able to claim a 15 percent non-refundable tax credit for eligible expenditures made to their principal residence or cottage. The credit will apply only for work performed, or goods acquired, after January 27, 2009, and before February 1, 2010.

The credit will apply to expenditures in excess of $1,000, up to $10,000 for a maximum credit of $1,350 ($10,000 - $1,000 = $9,000 x 15%). However, family members (spouses and children) will be subject to a single limit based on their pooled expenditures. Any portion may be claimed by one or more of the other family members as a credit against that person’s tax otherwise payable. Qualified expenses include renovations or alterations of the home (including the land), the cost of labour and professional services, building materials, fixtures, equipment rentals, and permits.

The following expenditures will not be eligible for the credit:

• the cost of routine repairs and maintenance normally performed on an annual or more frequent basis.
• expenditures for appliances and audio-visual electronics - no flat screens!
• financing costs associated with a renovation (e.g. mortgage interest costs).
• alterations or other items, such as furniture or draperies, and other indirect expenditures for items that retain a value independent of the renovation, such as the purchase of construction equipment (e.g. that new table saw!).

Surprisingly, you are allowed to double dip by taking advantage of other qualifying Federal and Provincial programs. A good example is ecoENERGY Retrofit – Homes program http://ecoaction.gc.ca/ecoenergy-ecoenergie/retrofithomes-renovationmaisons-eng.cfm

And finally, you are required to have acceptable documentation, such as agreements, invoices, and receipts that must clearly identify the type and quantity of goods purchased or services provided, including, but not limited to, the following information:

• information that clearly identifies the vendor/contractor, their business address and, if applicable, the GST/HST registration number;
• a description of the goods and the date when the goods were purchased;
• the date when the goods were delivered (keep your delivery slip as proof) and/or when the work or services were performed;
• a description of the work performed including the address where the work was performed;
• the amount of the invoice; and
• proof of payment. Receipts or invoices must indicate paid in full or be accompanied by other proof of payment, such as a credit card slip or cancelled cheque.

Summary of proposed Canada Pension Plan changes

On May 25, 2009, the Department of Finance Canada announced some proposed changes for the Canada Pension Plan to encourage longer careers. The changes are to be phased in from 2011 to 2016, so they will affect anyone planning to retire after 2010. These proposed changes have to be approved by Parliament and the provinces (not including Quebec, which has its own pension plan) before they can take effect.

a) Early retirement (before age 65) means lower payments. CPP benefits will be reduced by 7.2% for each early year (6% under the old rules). This means that if you start collecting CPP at age 60, your payments will be 36% less (30% under the old rules) than if you wait until age 65.

b) Late retirement (after age 65 but before age 71) means higher payments. CPP benefits will be increased by 8.4% (6% under the old rules). This means that if you wait until age 70 to take your CPP, the benefit payments will be 42% higher (30% under the old rules) than if you wait until age 65.

c) Those who are under age 65 and still working will be able to collect CPP. Currently, two months of unemployment (or greatly reduced income) are required to qualify. For example, clients may choose this option in a recession when they have to take new employment that does not pay as much as their last job and require an income supplement.

d) Those who are over age 65, still working, and collecting CPP will be able to make voluntary contributions into CPP through their work to increase their benefits.

e) The calculation for CPP will change as well (currently the lowest 7 years of earnings are omitted from the calculation). Under the proposed changes, the lowest 8 years will be omitted so that the benefits are not weighed down by low earning years.

These changes do not affect the Quebec Pension Plan.

Ottawa house prices

Canadian house prices in April were down 6.7% from a year earlier, according to the Teranet-National Bank National Composite House Price Index™. It was the fifth consecutive 12-month decline. April was also the eighth straight month in which the composite index fell from the month before—the longest run of monthly declines since the beginning of index coverage in February 2000. The composite index is now 8.9% below the peak of last August. Vancouver prices have shown 10 straight monthly declines and are down 11.9% from their peak. Toronto prices have declined eight months in a row and are 11.3% below their peak. In Ottawa, the downtrend is less pronounced. Prices have declined in each of the six months since the October peak and are now down a cumulative 4.8%.