Investment Deduction Question

[CDNPatriot]

I'm currently doing a smith maneovre on the house. It's under my name only but I am in a higher tax bracket then my wife. Can I split the income made from investments so that we pay less?

[BillyParadise]

Not having a spouse anymore (whew!), I'm just doing a 'makes sense' estimation here, but:

a) the investment loan is the source of the tax deduction
b) you can invest in anything the has the potential for profit - including loaning the money out, as long as its higher than your cost of capital. So if you're paying 5% for your LOC, you could loan it out for 5.25% or something to your wife, who could conceivably invest it to get superior returns. Then the gains would mostly be hers.

Maybe I'm overcomplicating it. I dunno. That's the kind of thing I hired an advisor to figure out for me.

[Thalo]

I'm currently doing a smith maneovre on the house. It's under my name only but I am in a higher tax bracket then my wife. Can I split the income made from investments so that we pay less?

You can't split investment income, it gets attributed to whomever the money originally belonged to (whoever earned it). Billy has a good idea: since you're borrowing to invest anyway, charge your wife an interest rate equal to what the HELOC/mortgage is charging you (for no tax consequence to yourself), your wife invests it, pays a lower marginal tax rate, and writes off the interest she pays you.

[CDNPatriot]

Can I then also write off the interest that I pay?