What’s new for 2009 tax returns

What’s new for 2009 tax returns

By Steve Hirji

Canada Revenue has made several changes to tax regulations for 2009, mostly to boost the ailing economy and to promote greener environment. I have listed some of the changes below.
1. HOME RENOVATIONS TAX CREDIT.

Every year taxpayers spend thousands in house renovations and introduce energy saving devices. Home Renovation Tax Credit applies to work performed or material purchased between January 27, 2009 and February 1, 2010. The amount is claimed in your 2009 tax return. Expenses have to be more than $1,000.00 but not over $10,000.00.

Examples of expenses allowed include:

• Finished basement.

• Remodelling kitchen & washroom.

• New floor & carpet.

• New walls, decks, fence.

• Driveway.

• Water heater, furnace, windows.

Expenses not eligible are regular maintenance eg carpet cleaning, furnace tune up, snow removal, lawn care, purchase of furniture & appliances like fridge etc.

Please keep valid receipts in case Revenue Canada wants to see them. Some people perform renovations on cash basis hoping to save GST and not obtaining proper documentation from their contractors. . While they have saved insignificant 5% GST they have actually lost huge 15 % tax credit.

2. HOME BUYERS’ AMOUNT.

The government is encouraging citizens to save and buy their first home thus boosting the housing market. If you bought your first home after January 27, 2009 you can claim $5,000.00 tax credit. The claim can be split between you and your spouse but combined total cannot exceed $5,000.00. You can still qualify for the tax credit even if you are not a first time buyer as long as you did not own a home in the last four years.

3. WITHDRAWAL FROM RRSP FOR BUYING A HOME.

First-time home buyers can withdraw, without paying any tax, up to $25,000 from RRSP account. This is up from previous limit of $20,000. Therefore husband and wife can withdraw $25,000.00 each with a total of $50,000.00. The government realises that house prices are still high despite the recession. For example the average price of a home in Toronto is $375,000.00. A larger amount of down payment is required to lower the risk of mortgage, hence taxpayers being allowed a larger withdrawal from RRSP. Keep in mind that while RRSP withdrawals are tax free, the amount has to be paid back in 15 years or you will face a hefty tax penalty.

4. HARMONIZED SALES TAX. (HST)

The new HST kicks in on July 2010 and its purpose is to combine GST of 5% and PST of 8 % into one rate of 13 %. There is no increase in total sales tax so if you own a business you will not be affected as far as tax rate is concerned. But businesses will have to meet extra administration cost e.g.
reprogramming their cash registers or buy new registers, printing new receipts and invoices, setting up new accounting records or software etc. The new HST will affect consumers (including businesses) however as items previously not subject to PST will be included in HST. Consumers will pay 8% more on following items in HST

• Gasoline.

• Utilities (heating, hydro, gas)

• Professional services e.g. legal, accounting)

• Real Estate commissions.

• Condo Fees

• Taxi fares.

• Labour cost in home repairs.

• Car repairs, towing, cleaning.

• Funeral cost.

• New homes over $ 400.000.00 and so on.

However all is not “gloom and doom” with HST. To please taxpayers the government will give out cash rebates in 2009 and 2010 on instalment basis. Watch out for rebate cheques in mail. Who says that the taxman has no heart? !!!

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Steve Hirji is a professional accountant and has a private practice specializing in accounting and tax matters. Please see his advertisement on page 12. He is located at 25 Denison Rd West (at Eglinton West & Weston Rd) and can be reached at 416 245 7529.