Is Mortgage Interest Tax Deductible in Canada?

When it comes to taxes, every homeowner and investor is looking for a way to save a few bucks. The burning question: Is mortgage interest tax deductible in Canada? Let's break it down!

Your Primary Residence

For most Canadians, the dream of deducting mortgage interest on a primary residence remains just a dream. Unfortunately, you can't deduct interest on your primary home.

Rental Properties to the Rescue

Here's where it gets interesting. If you own a rental property, the interest on that mortgage is fully deductible. This can significantly reduce your taxable income from rental earnings. So, if you're considering a real estate investment, this is a golden nugget.

The Mixed-Use Scenario

What if your home is pulling double duty? Say you rent out your basement or use part of your house as a home office. Good news! You can deduct the mortgage interest proportionally. For example, renting out a quarter of your home means you can deduct 25% of the interest.

Steps to Claim Your Deductions

1. Rental Properties: Use Form T776, Statement of Real Estate Rentals.
2. Home Office: Use Form T2125, Statement of Business or Professional Activities.

Why Bother?

• Tax Savings: Reduce your tax bill and keep more of your hard-earned cash.
• Accelerate Mortgage Payoff: Use the savings to chip away at your mortgage faster.
• Build Equity: Watch your net worth grow as you reduce your mortgage debt.

Understanding these rules can help you make smarter financial decisions.

Mortgage Rates starting @ 4.99% as of this publication.

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