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Newsletter Page 2 - Toronto Certified General Accountant
Newsletter March 2009
Tax Planning and the Proposed 2009 Federal Budget
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Small Business Needs (Cont'd - Page 2)
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Budget Introduces a One-Time Home Renovation Tax Credit (HRTC)
Tax plan: Pay Yourself Rent and Claim the HRTC for Personal-Use Expenditures (Cont'd)
Eligible expenditures can be made on both a home and cottage, with a maximum claim of $10,000
per family. In the case of condominiums and co-operative housing corporations, the individual’s
share of the cost of eligible expenditures for common areas will qualify.
What are eligible expenditures?
“To be eligible, expenditures incurred in relation to a renovation or alteration to an eligible dwelling
(or the land that forms part of the eligible dwelling) must be of an enduring nature and integral to
the dwelling, and includes the cost of labour and professional services, building materials, fixtures,
rentals, and permits.”
The definition above includes land that forms part of the eligible dwelling. Landscaping would qualify,
as long as it can be argued that it is of an enduring nature and integral to the dwelling. Maintenance
contracts such as lawn care do not qualify.
Pay Yourself Rent As a business owner, you can pay yourself rent from your business for the
workspace in your home set aside for business use. This is another way to access dollars from your
business tax-free. You can deduct the business workspace portion of your home expenses such as
mortgage interest, property taxes, utilities, home insurance, repairs and maintenance and
landscaping. If your business workspace portion is, for example, 20%, then you can take 20% of
your landscaping costs and claim them as part of your rent paid against your business income. You
get a bigger bang for your buck claiming a home renovation as a business deduction rather than
as an HRTC, and without having to deal with the HRTC claim restrictions.
Where does the HRTC come in to play then for business owners? For home renovation expenditures
made to common areas, such as the roof, floors, hallways and washrooms that are used both for
personal and business, the HRTC can be claimed for the personal-use portion of those expenditures.
In my previous landscaping example, the other 80% of landscaping costs that were allocated for
personal use, can be claimed as an HRTC (subject to the claim restrictions).
Budget Introduces Accelerated Write-Offs of Equipment
Tax plan: Buy Equipment Before the End of the Business Fiscal Year
The cost of equipment is normally spread over more than one year and not expensed immediately
upon purchase. This is achieved by claiming capital cost allowance (CCA), which is the tax law’s
term for depreciation. Under the budget:
- Computers and software acquired after January 27, 2009 and before February 2011 can be fully
written off in the year purchased
- Machinery and equipment that are used to manufacture and process goods and purchased
before 2012 can be written off over a two year period
Consider making the purchase of equipment before the business fiscal year is over, so your
business gets the tax deduction sooner than if you waited until the start of the next fiscal year.
Stay Tuned....
My next newsletter will continue to discuss ways to access dollars from the corporation on a
tax-free or low-tax basis.
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Toronto Certified General Accountant
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