It’s Tax Time!
It’s tax time again and most Canadians are wondering, ‘Can I make my mortgage interest on my home tax deductible?’ I have great news for you! According to the Canada Revenue Agency, interest may be tax deductible if you borrow money for the purpose of earning income from a business or property.
There are basically two strategies in doing this. Let’s assume you have a house with no mortgage on it and you want to make a business investment. You can obtain a line of credit and use your house as collateral. The interest paid on the home equity loan is then tax deductible because it was used for business purposes.
If you have an existing mortgage and excess cash or investment, you could sell your investments, pay off the mortgage, and then re-borrow the proceeds to use for the purpose of business investment. By doing this, you have converted your personal mortgage into a business debt where the interest then becomes tax deductible. The advantages of this approach provide flexibility in obtaining personal mortgages at low rates while preserving the use of the mortgage for business purposes.
If you have a rental property, you can also use this tax-reduction strategy even further. When you receive your rent, you can then use the funds to help pay down your personal mortgage. Once paid, the rental funds move to the line of credit and are then transferred to the investment bank account. They are then used to pay down the mortgage on the rental property. Using this method, it is possible to have your mortgage interest become fully tax deductible.
With any strategy there are risks involved because such strategies, if not properly executed, can be challenged by the CRA. Therefore, it is important to properly structure such strategies and get the proper professional advice from a chartered professional accountant, financial planner and professional mortgage broker.
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at Dominion Lending Centres’ new location: 281 Woodbridge Ave., Unit 28 Woodbridge, Ont.
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