# Home Renovation Tax Credit is back



## HaroldCrump (Jun 10, 2009)

The Home Renovation Tax Credit from 2009 *is back*
A couple of key differences from the 2009 version:
- This time it is no longer a temporary credit - it will be a permanent 15% tax credit
- Renovations capped at $5K instead of the previous $10K
- A minimum spend of $1K required to claim the credit
- Won't be effective until 2017, unlike the previous one, which was effective immediately

Sounds like a typical pre-election promise - a targeted, tax cut pandering to a specific voter group and a specific region.


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## Woz (Sep 5, 2013)

Interesting. It seems real estate is getting a lot of love leading up to the election: home renovation tax credit, interest rate cuts, and 100% of rental income in secondary suites to count towards mortgage qualifications.


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## HaroldCrump (Jun 10, 2009)

Woz said:


> Interesting. It seems real estate is getting a lot of love leading up to the election: home renovation tax credit, interest rate cuts, and 100% of rental income in secondary suites to count towards mortgage qualifications.


Agreed. + all those are telltale signs of a recession, whether it is "technical" or not.


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## andrewf (Mar 1, 2010)

As if we needed another tax cut for home owners... a permanent granite countertop tax credit. 

If you want to cut taxes, cut taxes. I don't need Uncle Steve to tell me what hoop I need to jump through to get tax relief.


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## jaybee (Nov 28, 2014)

Sounds like a typical pre-election promise - a targeted said:


> Exactly. That's the Conservative Party of Canada's MO. Having said that I need to replace some windows and doors, so I welcome this.


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## OptsyEagle (Nov 29, 2009)

So let me get this straight. The Harper government has decided to implement another Home reno tax credit in hopes of landing him and his cronies a job for the next 4 years. In doing so, they are willing to put thousands of Canadian contractors/workers out of work while their customers wait almost 18 months to do any more home renovations.

Nice guys. Hello recession.


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## HaroldCrump (Jun 10, 2009)

Agree with all the above posters.
The tax cut promises are getting smaller & smaller, thinner & thinner.
They have literally run out of bribes.

Anyhow, I didn't wish to make this a political thread ;o)


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## sags (May 15, 2010)

They are out of money and everyone knows it............so any politician promising grandiose spending is going to have to tell it like it is...........higher taxes or more debt.


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## agent99 (Sep 11, 2013)

I used one of the earlier offers for our energy upgrade. Basically what it comes down to, is that you don't have to pay the HST. 

Of course you save even more if you don't do the reno at all. Our energy upgrade continues to pay back in energy savings, but not so sure about those new kitchen cabinets that my wife wants. Good thing is that I can tell her we have to wait until 2017 to do them  And then, only if Harper gets re-elected which she doesn't want to happen anyway ....


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## uptoolate (Oct 9, 2011)

So how will this impact the underground home reno business?


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## HaroldCrump (Jun 10, 2009)

uptoolate said:


> So how will this impact the underground home reno business?


Don't know about underground economy, but back in 2009 when the credit was first introduced, we were doing major home renovations anyway.
It was quite clear that (legal) contractors increased their rates to account for the tax credit.
Hard to put an exact % on it, but the increase was easily 10% or more.
I recall posting about it on the forum here - I am sure you can search for it by my user name.

Just like the fees for most kids' activities increased after the child fitness and cultural activity tax credits were introduced.

This is how most (all?) subsidies & income re-distribution tricks work out - unintended consequences.


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## uptoolate (Oct 9, 2011)

Yes that sounds about right. And of course I was joking about the underground economy. We all know that there is no such thing.


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## Davis (Nov 11, 2014)

e said:


> So how will this impact the underground home reno business?


Fixing your basement will be an eligible expense. ;-)


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## VideoTaxJoe (Jun 24, 2015)

From a Globe and Mail article:

"Where it should have the biggest impact is in combatting the underground economy, Mr. Lee (CEO of the Canadian Home Builders Association) said. The construction industry estimates that roughly half of all home renovation jobs under $5,000 are paid in cash, a huge sum of foregone tax revenue.

Back in 2009, “we saw that the underground economy and cash jobs really dried up to a large degree because all of a sudden people were asking for receipts,” he said. “That’s really important for us because it results in lost tax revenues and really creates a bad name for many people in the industry and makes it hard for good, upstanding businesses to compete.” He estimated that an increase in tax revenue from requiring contractors to report their earnings will offset the cost of the program enough to potentially make it revenue-neutral."

http://www.theglobeandmail.com/repo...r-home-renovation-tax-credit/article25836672/


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## Woz (Sep 5, 2013)

And another change that should boost real estate has been announced. Conservatives pledge to increase amount you can withdraw from your RRSP for a home from $25k to $35k.

http://business.financialpost.com/p...ians-withdraw-more-money-from-rrsps-for-homes


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## carverman (Nov 8, 2010)

VideoTaxJoe said:


> From a Globe and Mail article:
> 
> "Where it should have the biggest impact is in combatting the underground economy, Mr. Lee (CEO of the Canadian Home Builders Association) said. The construction industry estimates that roughly half of all home renovation jobs under *$5,000 are paid in cash, a huge sum of foregone tax revenue.*


The big "IF" here is that this renovation tax credit is just another Harper election promise to get back in . 



> Provided the Conservatives are re-elected in October, the tax credit would be phased in starting in the 2016-2017 budget year,


So unless Harper gets back behind the wheel, it's all heresay. The other two parties don't even mention this and a lot of things can happen between October19, 2015 and
"mid year budget 2016-2017." That stick they are waving the carrot to get more votes is getting longer and longer.
At best, all the homeowner can do is save 15% on $5000, which is about $650 to $750 on a renovation that will cost a lot more than $5000 in most cases. 

They may be trying to stifle the undeground economy targetting renovators that don't report income.


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## Davis (Nov 11, 2014)

VideoTaxJoe said:


> From a Globe and Mail article:
> 
> "Where it should have the biggest impact is in combatting the underground economy, Mr. Lee (CEO of the Canadian Home Builders Association) said. The construction industry estimates that roughly half of all home renovation jobs under $5,000 are paid in cash, a huge sum of foregone tax revenue.
> 
> ...


It would be really helpful to the debate if he provided evidence, rather than anecdotes. Of course the home building industry would support this - they'll make money from it. Anecdotally I heard that renovators report some transactions so as not to attract the attention of auditors, so that if you asked for a receipt, you'd be put in the reported pile, and someone else who be moved to the unreported pile. I don't have actual evidence to back this statement up, but neither does Mr. Lee.


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## HaroldCrump (Jun 10, 2009)

Woz said:


> And another change that should boost real estate has been announced. Conservatives pledge to increase amount you can withdraw from your RRSP for a home from $25k to $35k.
> http://business.financialpost.com/p...ians-withdraw-more-money-from-rrsps-for-homes


This is a really, really bad idea.

Far from _increasing_ the limit, the HBP program should have been _dissolved_ a long time ago.

The HBP program targets exactly the wrong demographic and makes them mortgage slaves.

This just makes it worse.


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## sags (May 15, 2010)

My son works for a large fencing company as an installer, and is constantly asked to do "cash jobs".

He already works 60 or more hours a week, so he has no time to do them............but the underground economy is very big.


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## carverman (Nov 8, 2010)

HaroldCrump said:


> This is a really, really bad idea.
> 
> Far from _increasing_ the limit, the HBP program should have been _dissolved_ a long time ago.
> 
> ...


Well stated..mortgage slaves. All this will do is allow them to withdraw more out of their future savings for a larger house that they can't afford, and when the
real estate crunch comes, or interest rates rise someday, they will have less for retirement than they would have if they left it alone.


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## Guban (Jul 5, 2011)

HaroldCrump said:


> This is a really, really bad idea.
> 
> Far from _increasing_ the limit, the HBP program should have been _dissolved_ a long time ago.
> 
> ...


Rob Carrick agrees, but sounds like his reasoning is, at least in part, due to the high flying housing market.

https://secure.globeadvisor.com/servlet/ArticleNews/story/gam/20150813/RBGICARRICKRRSP


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## andrewf (Mar 1, 2010)

To me, the rationale for HBP is much-diminished now that we have the TFSA. TFSA is a perfectly valid place to park your down-payment savings while waiting to buy a house.

Raising HBP from $25k to $35k will help me personally (kind of--I don't really need it to buy a house), but I don't think it is terribly impactful from a policy-perspective. It's a plank that won't cost the government much money and most people would find hard to argue with.


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## sags (May 15, 2010)

I watched the Jack Mintz interview on BNN, in which he outlined the reasons he believes the ORPP is a bad idea and expanding the CPP isn't much better.

Key among his reasons, is that money contributed to the ORPP......would be better spent buying a home.

He said buying a home is the "most important investment" a person can make...........and home equity is more accumulated wealth than the CPP, RRSP, TFSA and other investments combined. Therefore his conclusion that most people already have enough wealth for retirement.

Wow.............and he is the Director of the School of Public Policy at the University of Calgary.

This is what he is telling his students ?

http://www.bnn.ca/Video/player.aspx?vid=679290

His comments on housing start at 2:30 in the video.


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## Davis (Nov 11, 2014)

^ There's no whore like an old whore.


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## Guban (Jul 5, 2011)

andrewf said:


> To me, the rationale for HBP is much-diminished now that we have the TFSA. TFSA is a perfectly valid place to park your down-payment savings while waiting to buy a house.
> 
> Raising HBP from $25k to $35k will help me personally (kind of--I don't really need it to buy a house), but I don't think it is terribly impactful from a policy-perspective. It's a plank that won't cost the government much money and most people would find hard to argue with.


I have the Rob Carrick quote, above, but I don't necessarily agree with him about withdrawing under the HBP is like raiding your retirement. He also mentioned a TFSA withdraw, but I think that the HBP withdraw is better because it includes a tax refund from the RRSP contribution, or am I missing something here? A $10,000 TFSA withdraw to put as a down payment is not the same as a $10k HBP withdraw. It is more like a $10k times (1+ your marginal tax rate). Of course you have to pay it back, but you'd have to pay the bank anyways, so why not borrow from yourself?

I would not be against deleting the HBP from the tax code, however, as the general benefits are relatively small, and the tax code simplification would be nice. I wish that governments would take serious steps to simplify tax laws.


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## amack081 (Jun 23, 2015)

andrewf said:


> *To me, the rationale for HBP is much-diminished now that we have the TFSA. TFSA is a perfectly valid place to park your down-payment savings while waiting to buy a house.*
> 
> Raising HBP from $25k to $35k will help me personally (kind of--I don't really need it to buy a house), but I don't think it is terribly impactful from a policy-perspective. It's a plank that won't cost the government much money and most people would find hard to argue with.


I disagree. All things being equal in terms of investment returns, the advantage that HBP through your RRSP vs your savings through the TFSA is the tax benefit of increasing an individuals refund (or reducing ones tax payable) . 

If you reinvest the refund into your RRSP you will accelerate your savings in your HBP.

For instance, if you invest 5,000 into either your RRSP or TFSA, assuming a 5% return on investment and a personal tax rate of 30%:

TFSA after year one: 5250

RRSP after year one: 5250 + (30%*5000): 6750

The drawback of HBP is the repayment, however if you can afford to make annualized repayments, you should own a house in the first place.


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## HaroldCrump (Jun 10, 2009)

The whole concept of HBP has become counter-productive now.
The program was introduced in the early 1990s, during the trough of the previous real estate crash, and the early 1990s recession.
It could be argued that it was a stimulus program at that time.

Let's also not forget that the program was introduced at the behest of the real estate lobby (CREA, etc.)

These days, it has become a tool to push more people into the housing market, make people stretch their budgets, and acts as a demand stimulant.
Our housing market does not have a demand problem.


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