Tag Archives: Home Energy Retrofit
Stephen Dupuis – Toronto Star
The underground economy in Canada’s renovation industry grew as if it were on steroids after the federal goods and services tax (GST) was introduced in 1991 and there’s no reason to believe it won’t grow as quickly after the HST kicks in on July 1, 2010. Unfortunately, that’s not the only downside of the pending tax increase on this key strategic sector.
While the provincial government has substantially mitigated the impact of the HST on new homebuyers through the rebate framework, the renovation sector was left outside the rebate structure, compounding the sin of omission by the federal government when the GST was introduced in 1991.
According to a report released by the Canadian Home Builders’ Association last week, the residential renovation sector accounts for some $53 billion in spending in Canada, roughly two-thirds of which is paid to contractors.
Provincially, Ontario homeowners spend about $20 billion on renovation with $14 billion of that through contractors.
Drilling down further on the Ontario numbers, the $14 billion is split roughly two-thirds labour and overhead, which is currently PST-exempt, one-third materials, which is subject to PST. The PST on materials works out to 2.6% of total cost of a typical reno.
By applying the HST to labour and overhead, it’s obvious that we are looking at an instant cost increase of 5.4% (PST is 8%) with no value added. The CHBA/Altus report calculates the impact of that increase to be $757 million and that’s a huge number that has legitimate, professional renovation contractors rightfully discouraged.
As one contractor said to me when the HST was brought forward, “prior to the 7% GST, I had clients who would ask if I would consider a 10% discount if they paid cash. After the 7% GST came into effect, clients changed tactics. They disliked the GST as much as anyone and would ask if they could pay cash to avoid it. Bingo! The underground renovator no longer had to give a discount for cash – henceforth the government would do it. Clients were now happy simply saving the hated 7%. On July 1, 2010 that incentive to pay cash will jump to 13%!”
Unfortunately, foregone sales tax revenues are just the tip of the iceberg as far as the problems with cash deals go.
Contractors operating in the underground economy are also avoiding everything from income tax to workers’ compensation premiums to building permit fees.
A 2008 report by the Ontario Construction Secretariat estimated that the federal government lost between $225 million and $298 million in GST revenues annually between 2003–2005 due to underground activity in the renovation sector.
Meanwhile, both levels of government are losing upwards of $1.6 billion in income taxes, and this is all before the HST kicks in.
The CHBA/Altus Report points out many other pitfalls of harmonization, including the fact that the tax increase undermines the federal Home Renovation Tax Credit and the federal/provincial home energy retrofit programs.
The report further notes that the HST will likely reduce the volume of reno activity, costing precious jobs, while exposing homeowners to the liabilities and risk of conducting renos without a contract.
The simple solution put forward by the CHBA is to maintain the tax rate on all professional renovations, not just “substantial renovations” as defined under the GST, at the revenue neutral level of 2.6%.
We’re calling on federal Finance Minister Jim Flaherty to heed that call and urge him to use this window of opportunity to get the HST right from a renovation standpoint.
Stephen Dupuis is president and CEO of the Building Industry and Land Development Association. The views expressed are those of the president.
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By Tracy Hanes – Toronto Star
If you’re thinking about renovating your home this year, the provincial and federal governments are prepared to throw some incentives your way.
Planning on landscaping the yard, renovating the bathroom or installing new hardwood floors? For these and many other home improvements, The Home Renovation Tax Credit (HRTC) will provide a one-year, 15 per cent tax credit.
If you’re contemplating replacing your furnace, adding solar panels, beefing up your insulation or replacing leaky windows, the federal ecoENERGY program will provide rebates on a wide spectrum of energy efficient products and improvements, to a maximum of $5,000. That’s not all – the province will provide matching rebates under its Home Energy Retrofit program, so between the two programs, a homeowner can receive up to $10,000 in rebates.
Double dipping is allowed: you can also claim those energy efficient improvements under the HRTC program.
That means Ontario homeowners can receive up to $11,350 for a single home improvement project.
Home renovation tax credit
The HRTC will provide a one-year, temporary 15 per cent tax credit per family on eligible home renovation expenditures for work performed or goods acquired between Jan. 27, 2009 and Feb. 1, 2010. The credit kicks in after you spend $1,000, but no more than $10,000, making the maximum credit $1,350.
A wide range of projects are eligible, including kitchen, bathroom and basement renovations; new carpet or hardwood floors; adding a new furnace or water heater; interior or exterior painting; driveway resurfacing. You can also claim the credit for landscaping, new decks, fences, retaining walls and laying of new sod.
Not eligible are things such as furniture and appliance purchases, tools, carpet cleaning, maintenance contracts for furnace cleaning, snow removal and pool cleaning.
According to a recent survey released by the mortgage company ResMore Trust Co., 94 per cent of Canadian homeowners who are planning to do renovations between now and next February will use the HRTC. In fact, 39 per cent of 1,000 Canadians across the country surveyed by Research Now in early April said their decision to renovate was positively influenced by the introduction of the HRTC.
For information on the tax credit, go to cra-arc.gc.ca/gncy/ bdgt/2009/fqhmrnvtn-eng.html.
Ecoenergy and home energy retrofit programs
While the HRTC applies to most home projects, the ecoENERGY and Ontario’s Home Energy Retrofit programs apply only to energy efficiency improvements. Ontario’s program matches the ecoENERGY program dollar for dollar up to $5,000 for a total of up to $10,000 per household.
Examples of improvements that qualify include adding a new energy efficient heating or cooling system, upgrading to an instantaneous hot water heater or energy efficient windows, or increasing insulation.
To be eligible for the ecoENERGY program, a homeowner must have an energy efficiency audit done on his or her home, which costs $300 to $400 (the government provides a $150 rebate).
“The first step is to have an energy assessment done by an EnerCan licensed auditor,” says Natural Resources Canada media relations officer Jean Riverin. “If you start any renovations before the audit, you can’t submit the bill for a rebate.”
The energy efficient improvements must be done within 18 months of the energy audit (which is registered with NRC) and the cut-off is March 2011.
The renovator must document the aspects of the project that relate to increasing energy efficiency. Upon completion, a second audit (costing approximately $150 and not eligible for a rebate) determines that the work was done properly and scores the energy efficiency improvement. Then the grant application goes in and the homeowner will receive the federal rebate in about 90 days, says Riverin.
Handy homeowners can do the necessary improvements themselves, but it’s important to keep a copy of the invoices for the materials purchased for the upgrades, says Riverin, as they may be asked to submit copies. And homeowners are responsible for ensuring they obtain all necessary permits and meet all municipal and provincial building codes, he adds.
Recently, says Riverin, the federal government increased by 25 per cent the amount of rebates it gives on eligible improvements and the provincial government followed suit. While the maximum rebate is still $5,000, the money available for specific items has increased.
Here are some examples:
Replace your heating system and qualify for anywhere from $375 for an Energy Star gas furnace with an AFLUE (annual fuel utilization efficiency) of 92 per cent or higher to $4,375 for a new or replacement earth energy system certified by the Canadian GeoExchange Coalition.
Replacing an old air conditioning system with rated SEER 14.5 or higher will garner $1,250 in grants. A drain water heat recovery unit is eligible for $95 or $165, depending on its efficiency. Each Energy Star window you replace will get you $40; an Energy Star exterior door is eligible for the same rebate.
Some of the latest “green” technologies are included in the program. You can get back as much as $1,300 for a solar hot water heating system (estimated cost $4,000 to $8,000) between the federal and provincial grants and a provincial sales tax rebate offered on solar panels.
To find an energy auditor in your area or more about rebates, visit ecoaction.gc.ca/homes or homeenergyontario.ca.