Personal Finance

Mortgage Interest - Tax Deductible or Not?

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  • Feb 3rd, 2015 11:58 pm
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[OP]
Jr. Member
Aug 5, 2011
135 posts
7 upvotes
NORTH YORK

Mortgage Interest - Tax Deductible or Not?

Hi Everyone

I tried to search for a clear answer online regarding my mortgage situation but I have only found confusing/contradicting answers. I would appreciate if someone who is in the same situation or who knows about it could comment.

Here are the details:
1. Condo with a mortgage $150,000 coming up for renewal April 1st, 2014 (current primary residence)
2. Can get a line of credit of $80,000 based on the condo value
3. I would like to rent the condo but would also need to use the $80,000 line of credit as a down payment for another house

Questions:
According to CRA rental property rules,
1. Is the mortgage interest on $150,000 tax-deductible?
2. How about the interest on the $80,000...If not, how can I make it (or a portion of it) tax-deductible? What if I use some of it on the condo for upgrades etc?
3. Worst-case: since I will be using the LOC as a down payment for another property, the whole amount (mortgage + LOC) is not tax-deductible

I am trying to determine what is the best option for me as I might not have enough for the down payment of the other house.

Any links for more information is much appreciated.

Many thanks
DealEcstatic
1 reply
Deal Addict
Sep 5, 2009
2947 posts
1124 upvotes
The money you borrow for the next personal house (interest) is not tax deductible. If you turn your condo into a rental the mortgage interest will become tax deductible, but there are other tax implications when you do that.

You could do the smith manoeuvre for a while to generate some money from your rental to build a down payment for a primary residence. That requires a lot of financial organization or a good accountant. Check out the thread on that.

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