The federal home re-novation tax credit appears to have been a big success; many people seem to have taken advantage of the stimulus measure introduced in this year\u2019s federal budget, which provides a credit of 15% of the cost of renovations completed by Feb. 1, 2010, to a maximum of $1,350.
Although it\u2019s difficult to get figures on the impact of budget measures, there\u2019s usually some indication of their impact. In this case, the value of renovation activity was up by almost 9%, at an annualized rate, in the second quarter of this year vs a 3.6% decline in the first quarter and a 15.8% drop in the fourth quarter of 2008.
\u201cA good part of this can be chalked up to the tax credit,\u201d says Derek Burleton, director of economic analysis at Toronto-Dominion Bank<\/b> in Toronto.
Data for building- and outdoorsupply stores are also indicative of a rise in activity related to the HRTC, says Paul Ferley, assistant chief economist with Royal Bank of Canada<\/b> in Toronto. Sales at these stores were up by 1.1%, seasonally adjusted, in May. Although this trend reversed in June, when sales fell by 0.6%, sales jumped again in July by a 1% margin \u2014 all the more impressive, given a 0.6% drop in overall retail sales in that month.
There\u2019s also lots of anecdotal evidence; many people know friends or family doing work on their houses. However, some of the pickup in renovation may have happened anyway, suggests Dale Orr, president of Dale Orr Economic Insight<\/b> in Toronto, given the low interest rate environment.
Doug Porter, deputy chief economist with Bank of Montreal<\/b> in Toronto, agrees, noting that the housing market had picked up in the spring and summer and that renovations are usually correlated. In addition, Porter points out, even with the 9% increase in reno activity in Q2, that figure was still down by 3% from a year earlier, so he wouldn\u2019t call the increase a boom.
Most of the 2009 budget measures were passed in Bill C-10 in April. Those affecting individuals include:
> an increase in the level at which the first two personal income tax brackets apply;
> an increase in the personal exemption;
> an increase in the age credit;
> an increase in the RRSP withdrawal limit for the purchase of a first home;
> amendments to RRSP and RRIF rules to allow for losses in accounts between time of death and final distribution.
This leaves the HRTC, the first-time homebuyer credit related to closing costs and the enhanced benefits under the working income tax credit, legislation for which was introduced Sept. 30.
The federal government also announced in the 2009 budget that it would enhance employment insurance benefits. Extension of benefits to 50 weeks from 45 weeks for those in high-unemployment areas is already in effect. Legislation has also introduced to extend benefits for long-tenured workers in any area, and there are rumours that the feds will soon introduce legislation to extend parental benefits to self-employed individuals.
Amendments in the budget to RRSP and RRIF rules that allow for the claim of losses in these accounts between a planholder\u2019s death and the final distribution of plan assets are particularly important, says Jamie Golombek, managing director of tax and estate planning with Canadian Imperial Bank of Commerce<\/b>\u2019s private wealth-management group in Toronto and chairman of the Investment Funds Institute of Canada<\/b>\u2019s taxation working group.
For example, if an RRSP was worth $200,000 when the planholder died but worth only $160,000 when it was distributed, the estate had lost $40,000, which couldn\u2019t be claimed previously. Now, the loss can be claimed on the deceased\u2019s final tax return.
The biggest measure in this year\u2019s budget to stimulate the economy was infrastructure spending. Although not a tax measure, the concept is hugely important in terms of stimulating the economy, thereby providing jobs and income.
Most of the money has been allocated, but how quickly the stimulus will translate into economic activity isn\u2019t known. Economists have assumed that most of the impact will be felt in the second half of this year and, particularly, in the first half of 2010.
This timing works out well. Although the economy is already showing signs of recovery, economists caution that the recovery is likely to be slow and that this infrastructure-related activity will help keep the economy growing.\tIE<\/b>
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