2021-0894121E5 Retrofit loans for homeowners

Principal Issues: What are the tax implications to Canadian homeowners who receive a loan under stream 1 of the Canada Greener Homes Loan Initiative?

Position: The amount of the loan received will not be included in the income of the recipient for income tax purposes. Interest expense, default charges, customary costs, and expenses for administration, monitoring and enforcement will not be deductible for income tax purposes.

Reasons: The loans under stream 1 of the Canada Greener Homes Loan Initiative are obtained for personal use, for purposes of acquiring retrofits to improve the primary residence of the homeowner.

Author: Brennan, Christopher
Section: 9, 12(1)(x), 20(1)(c), 20(1)(e), 20(1)(e.1), 80.4(1)

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                                                                                         2021-089412
                                                                                         Chris Brennan, CPA, CA

January 12, 2022

Dear XXXXXXXXXX:

Re: Canada Greener Homes Loan Initiative

This is in reply to your request for our views on the income tax implications to the recipients of loans under stream 1 of the Canada Greener Homes Loan Initiative (CGHLI).

Based on the information you have provided, it is our understanding that the loans under stream 1 of the CGHLI, are interest-free non-forgivable loans available to Canadian homeowners to complete deep home retrofits to their primary residence.

It is our view that an amount received in respect of a loan to the homeowner for the personal use of acquiring retrofits to improve their primary residence should not generally be included in their income, and therefore, will not be taxable under the Income Tax Act (Act).

In addition, in the event of a loan default, the recipient will not be able to deduct any interest expense under paragraph 20(1)(c) of the Act on the CGHLI loan obtained for personal use. Furthermore, the recipient will not be able to deduct default charges, customary costs, and expenses for administration, monitoring and enforcement under paragraphs 20(1)(e) and 20(1)(e.1) of the Act .

I trust the information provided is helpful.

Yours truly,

Lita Krantz, CPA, CA
Manager, Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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