Is Mortgage Interest Deductibility Possible in Canada?
While it’s not generally possible here in Canada, in the United States it’s common practice to deduct mortgage interest at tax time. However, in particular circumstances, it is possible for Canadians to save money on taxes by doing just that.
Now to be fair, this isn’t an option for everyone and, according to this, one does have to be a home-based business owner to be able to even contemplate it. Like other deductions, it is based on square footage of the business versus the total size of an individual’s primary residence.
The general rule is that in order to claim the deduction, there has to be income from either a home-based business or from renting a percentage of a residential property.
However, the ongoing mortgage interest deductibility debate is quite interesting, not to mention colourful. It seems that people are continuously attempting to circumvent the Canada Revenue Agency’s regulations on the subject.
Most famously, there is the “Smith manoeuvre” devised by Fraser Smith who is a former financial strategist from British Columbia. Smith is the author of Is Your Mortgage Tax Deductible? , which has sold over 50,000 copies.
Another way to deduct mortgage interest without really paying the interest is through the Canadian Home Income Plan (CHIP) or reverse mortgage. The proceeds of a reverse mortgage can be used to offset income tax generated by investments.
Then there are those who have creatively challenged the CRA’s regulations and have in some cases come out on top. I can’t help but applaud the ingenuity and perseverance that some have put into their quest to deduct their mortgage interest.
Obviously, in Canada, mortgage interest deductibility is a complicated matter and should be discussed with the right professional before considering. However, it is a viable option for some to offset the amount of tax one pays to the government. In the end, isn’t what we’re all trying to do?
