You've just bought a recreation property and the house could use some serious updating, or perhaps the family cabin that has been serving you well for many years is starting to show its age.
It might be time for some renovations and the timing couldn't be better, thanks to the Canadian Government's Home Renovation Tax Credit (HRTC). Many people don't realize the credit can apply to improvements you make to a vacation home, cabin or cottage.
Joanne Gorsalitz, communications manager with the Calgary Tax Services Office, says as long as your recreational property is reserved for personal use and not rented out, it is eligible.
Gorsalitz says the 15-per-cent non-refundable tax credit is available on expenditures of more than $1,000 to a maximum of $10,000.
The $10,000 can be shared between your primary residence and vacation property if you choose. The maximum available tax credit would be $1,350, which is 15 per cent of $9,000, since the first $1,000 is not eligible.
To qualify for the HRTC, the improvements you make to your recreation property must have an enduring nature to them, says Gorsalitz.
Some examples of eligible improvements can be found on Canada Revenue Agency's website (cra-arc.gc.ca), including renovating a kitchen, bathroom or basement, new carpet or hardwood floors, septic systems, wells, adding deck or permanent hot tub or installing solar panels.
Examples of ineligible expenses include buying new furniture, appliances, curtains or drapes, cleaning carpets or lawn care.
The expenses related to a project can include materials, permits, labour and professional services, fixtures and rentals. However, your own labour cannot be calculated as an expense.
Gorsalitz says the HRTC program covers projects begun, or entered into contract for, after Jan. 24, and that are completed and paid for before Feb. 1, 2010.
People should keep all the receipts and then report the total on their 2009 personal tax return.
A new line will be added to the T1 General Tax Forms and the amount will appear on Schedule 1 as a non-refundable tax credit.
More information is available at Canada Revenue Agency's website.
Just what projects you should undertake at your recreation property can depend on a lot of things, but you should keep in mind some basic advice about renovations in general.
Bruce Hopkins, general manager of the Remodelers Group of Companies in Calgary, says it's always a good idea to consider the value of a property and its location before deciding how much to spend on a renovation.
Hopkins says it wouldn't make sense to do $100,000 of improvements to a property in an area that is not highly sought after. But if your recreation property was built long before an area became popular, it might lend itself well to a more intensive renovation, to bring it up to the increased value of the neighbourhood.
For many renovations, people decide to target a few areas of a home.
Hopkins says kitchens and bathrooms are the two most popular areas to renovate, as they are often a major consideration when people are looking to buy a home.
However he says the return on investment for most renovations is considered to be about three to five years, so if you are planning to sell in the near future, you might want to carefully consider which renovations to undertake.
And make sure you are dealing with a reputable company.
He says while many people ask for references, it's better to visit homes the company has renovated, see the workmanship and talk to the homeowners.
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