Claiming Renovations

[MommaL]

I understand that one can claim home renovations on their income tax if it's related to daycare. Do one know how much (or what percentage) one can claim? In my case, it's a washroom that will be primarily used by the daycare kids. We haven't started the renos yet and are still debating what we want done, so I am just curious for the future.

[mickyc]

I claim all house renos. I am not sure what percentage my accountant uses but what I do is make a list of all home renos and a separate list of all daycare space renos. I give these to my accountant with all my other totals and he takes it from there.

[Suzie_Homemaker]

Might want check with CRA.

We were told we not able claim renovations because it increase value of our asset (house). We were told we can claim maintenance but not improvement.

When we pave our driveway, CRA were clear we not allowed to claim even percentage of it. They say if we added more gravel to drive to replace what wash away over years, that fine to claim as normal percentage but paving mean improving what we had and improving value of personal home and not able to claim. He did say once it was paved, when we had it sealed after for maintenance, then we can claim that. Same when we check about changing from carpet to hard wood in main living room. We told that improvement not maintenance and so not allowed to claim.

We do claim all house maintenance like painting, carpet cleaning, when air vents cleaned as percentage. We do claim all household maintenance for dedicated daycare space at 100% (that just the guest room for us which is nap room).

[Lee-Bee]

Are you only going to do the reno if it is claimable? I would be careful about doing any home renos with the expectation to have it claimable. I think this is an area that is greatly misunderstood by many and I can't help but feel that even different tax accountants might do things differently. If you plan to do the reno anyways I would do it and just consider it a bonus come tax time if you successfully can claim it.

I recall a tax course I took for home daycare noted that having new carpet installed was not claimable (like Suzie said, something about it improving the house) BUT if you buy a rug the exact size of the room and just lay it down (don't 'install' it) then it is claimable.

[Suzie_Homemaker]

Yes, this what we told too.

Same when we did our back deck. We made it bigger than it was and it was bit rickety due to age. CRA said repairing the existing structure is maintenance. Because it would be used by both daycare and family, then we could claim maintenance of it at usual percentage. Could claim all material for repairs, replacement wood where needed, screws, stain when done, that all fine.

But the addition bit would be an improvement. It not maintaining what we had but new and better than what we had. That potentially mean home improvement boost value of asset. It not claimable because our house is personal asset not business asset. So the wood, screws, stain for the new part could not be claimed.

[MommaL]

Thanks for the information ladies! I had no idea about the maintenance versus home improvement situation. I'll have to look into it further.

[superfun]

I could be wrong, but I think I know what the reasoning is behind it. If you do something new, like pave the driveway, you're improving the house. When you've increased the value on your house, and claimed it on your taxes as a business expense, then you are no longer able to sell your house and keep the profit tax free. The taxes you'd pay on the house profits are way higher than any potential savings from claiming the reno.
Again, I could be wrong. I think an accountant friend of mine explained it that way, but it was s long time ago.

[bright sparks]

It's tricky for sure! When I moved into my current home in 2012 there was no daycare space. I did it out of the master bedroom space for the first 12 months and the small dining room, 8x11 was my main bedroom on the ground floor. We ended up relocating the laundry room from next to the DR to the basement. We then knocked the wall down and made it into one room. Now it is a main floor family room, currently used as a daycare room. We did all the work ourselves so we haven't claimed a renovation as such, but DIY supplies related to this project. I understand that the CRA could say that this increases the value of our home but Id argue not as we lost a main floor dining room and laundry room to gain a family room. Additionally, we didn't pay any labor charges, and just claimed the individual items like drywall, compound, timber, trim, paint, light fixtures etc. It was also an absolute necessity for me to be able to do daycare and it is an exclusive space.

[mickyc]

That's why I just give everything to the accountant and let him do his thing.

We do all work ourselves so it's only ever materials that we claim but still it all adds up - usually a few thousand a year. CRA won't know what I had before so how will they know the material wasn't used for repairs?

I am pretty sure when I opened my daycare my accountant wrote off a lot of my renos for the basement. We added a sink and counters to the space, railings on the stairs etc. 2 years ago we had a full basement Reno as the daycare space flooded. It was all paid through insurance so nothing was claimed on my taxes. I did put up a pile of shelves in my laundry room and basement bedroom closet that I have every intention of claiming this year. It's because of daycare I desperately need it!

[RoseMomof2boys]

You can't claim renovations after you've the business is in operation. Only can claim maintenance or repairs.

My husband is a tax consultant and prepare tax returns with daycare business.

[bright sparks]

My accountant's majority of clients are home daycare providers. They travel around the golden horseshoe doing workshops that are catered towards home daycare providers that have different rules than other sole proprietors.

We can not claim any expense that adds value to our home even if it is solely for daycare use. It becomes a question of capital at that point and as we are not registered business' we have to be careful to keep purchases under $200 per item for capital purposes as it is. Once we add value to the house, a percentage, and inflation thereafter becomes taxable annually. Do not claim these as it is something we are not entitled to. We just got audited and it was in the area of maintenance and home improvements. Fortunately as we have had our house appraised three times by the same company, when we purchased, prior to renovation and then just this past August, we were able to contact the appraisers and request something in writing to prove that our house value had not been effected by the work we had done....as I had originally said it was due to us losing some rooms and gaining another...just reconfiguring the space to be more usable for our needs, not actually adding space. We had to fork out over $500 for this in writing, and we didn't get off scott free. The CRA accepted some of the expenses, but not others depending on whether it was cosmetic or structural work. In the end we were out of pocket as a result. Our accountant was very helpful in going through things step by step. They said we were entitled to claim all of it as it was submitted, but that it is a grey area and although the law says one thing, sometimes it is dependent on the cra auditor and at their discretion.

Whatever it is done now, all cleared up last week so it's funny that this should appear on the feed. I understand now moving forward and will only be submitting for cosmetic in the future and repair of daycare items not property....frustrat ing though when I have to replace a carpet damaged as a direct result of a daycare childs actions, but then I get pulled for claiming!!

[Gibbon]

Got almost the same question. It's so difficult to figure all out. There are so many things to take into account. I think it's easier to hire a professional who'll consult on this question.