Is your mortgage tax deductible?

Shopping for a mortgage is an intimidating process for most homeowners because, outside of interest rate, most people just don’t know what questions to ask. One area that is rarely explored is whether or not their mortgage may be tax deductible, in whole or in part.

In the old days, a tax deductible mortgage in Canada was unheard of. However, the introduction of new “line of credit” products through mortgage brokers has made tax deductible lines of credit almost as popular as traditional mortgages.

The concept of converting a Principal Residence mortgage into to a tax deductible investment line of credit has been approved by the Supreme Court and the Canada Revenue Agency (CRA). As a result, many Canadian homeowners are accelerating their retirement plans using this advanced mortgage strategy.

In order to make a mortgage debt tax deductible, it is essential that the homeowner is also an investor of some sort (this is a non-negotiable CRA requirement under the Income Tax Act). However, there are many types of Canadian investors who would benefit from structuring their mortgages with tax efficiency in mind including:

The Entrepreneur: Self employed by definition, entrepreneurs typically enjoy a plethora of tax benefits and write-offs. Whether they have a relatively small home-based business or a more established enterprise, these investors can benefit significantly from a tax efficient mortgage that is set up to cash dam their revenue and expenses.

The Real Estate Investor: Most investors know that when they purchase a second property to rent out, the mortgage will be tax deductible. What they may not realize is that they can use the cash flows from their landlord business to make their own mortgage tax deductible under CRA Cash Damming Rules.

The Market Investor: This is your typical Canadian homeowner. If you are not self-employed, then you likely earn all your income from salary. Highly qualified borrowers with equity in their homes, provable income and good credit, can also convert their mortgage into an investment loan if they are investing in the market (or plan to invest in the market) before they pay off their mortgage.

Not all homeowners are able to take advantage of this strategy, so we strongly recommend seeking the advice of a TDMP mortgage broker or TDMP financial advisor.

If you would like to see if you qualify for this program please visit my TDMP Website: Tax Deductible Mortgage Plan

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.