Tax deductible mortgages

Everyone knows you can’t write off mortgage Interest on your taxes. Or can you?

At Best Mortgages Vancouver one of the things we consider in our no-cost, no obligations review of your mortgage is whether or not you may be able to take advantage of a strategy that will make the interest payments on you mortgage tax deductible. Sound interesting? To have one of our Mortgages Specialists call you to discuss whether or not this option applies to you please click here or call us at 604-961-2400.

Generally mortgages on your principal residence are not tax deductible. However, money borrowed to use in your business, to purchase or operate a revenue property or to purchase investments such as stocks, mutual funds or bonds is tax deductible even if it is secured by a mortgage on your principal residence. As a result, if you own a business operate a revenue property, or have investments outside your RRSP you may be able to reorganize your financial affairs to reduce your tax bill and increase your financial security.

This strategy is briefly described below, but before you re-organize your financial affairs, you should seek the advice of a financial professional.
The main principal of this strategy involves converting your non-deductible mortgage debt into deductible investment loans. You can then use tax refunds from your tax-deductible investments to pay off your mortgage earlier so you can re-borrow and invest/re-invest to build a larger retirement portfolio. The interest from loans used to purchase more investments is tax deductible and therefore your tax deductions increase even more. These increasing tax refunds and the investments are free, and grow over the years due to compounding values.

Here are some examples of how you can save money on your taxes with the same debts and assets:

  • If you have a mortgage on your principal residence and assets such as stocks and bonds, you may be able to sell your securities, pay off your mortgage and then borrow using your home as security to purchase your securities back, thus allowing you to claim the interest
  • Borrow the operating costs of your business and use your cash flow to pay off your non-deductible mortgage on your principal residence
  • Purchase revenue properties with no money down, and then use the revenue to pay off the non-deductible mortgage on your principal residence