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The Renovation Tax Credit: All that and a bag of chips, really?

Steve Maxwell

February 2, 2009 9:10 PM

The Home Renovation Tax Credit was an important part of the Canadian Federal Government's Economic Action Plan to help kick start the economic recovery, but is it as beneficial as most people think? Steve Maxwell takes a look at its effect on the home renovation industry and asks homeowners to be cautious when taking advantage of the program.

I was in a veterinary office last Tuesday and I noticed a pamphlet for a credit card designed to cover pet expenses. The slogan under the headline read “Go ahead, now you can afford to . . . “. Really? Is access to money the same thing as being able to afford something? Surely we’ve not been brainwashed that much, have we?

All this has parallels to the financial incentives for home renovations offered by the federal government as part of Canada’s Economic Action Plan. I can get behind the idea as long as it doesn’t lure Canadians into making things worse for themselves; as long as it doesn’t fool us into believing that mere access to money (or in this case lower taxes) really determines our ability to afford something. It doesn’t.

The Action Plan offers up to $1350 in tax reduction for up to $10,000 spent on window and insulation upgrades, kitchen, bathroom or basement renovations, new floor coverings, decks, driveways and sod, among other goodies. All this is great. I’m all for better, more efficient homes and for government programs that might just prevent a recession from turning into a depression. Just don’t be fooled.

Despite its apparent complexity, the current economic turmoil has a very simple cause: too much of the world living too far beyond its financial means. Both corporations and individuals have overextended themselves, spending too much of tomorrow’s money yesterday. Sooner or later the piper’s debt is always paid, and he’s rung up quite a bill lately. Spending money you don’t have, to fix a world-wide problem caused by incurring too much debt doesn’t make a lot of sense, does it?

So here’s what I recommend. If you’ve got plans to upgrade your home in ways that actually make practical sense, and you’ve got the money to do it, go ahead. Educate yourself technically to recognize the difference between good work and bad, choose tradespeople only after they check out as legit, and don’t get taken in by a whole bunch of modern ideas about what it means to “afford” something.