When judging if mortgage interest is tax deductible, Jamie Golombek of the Financial Post reminds us that CRA looks at "the actual, direct use of the borrowed funds."
He writes about a lady who found that out the hard way. She moved from her personal residence into her rental property. CRA deemed her mortgage interest non-deductible because it was no longer on an “income-producing property.”
Read more in: The perils of writing off the mortgage
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Last modified: April 28, 2014
Funny story. A $150 consultation with an accountant coulda saved her thousands.
There must be a better way to do this. If you own a rental free and clear can you not get a line of credit on both properties and shuffle the money around? If you use a line of credit on your personal residence to pay off your loan on your rental, then that money is used for income? No promissory note required? Does the promissory note require the land to be transferred, or is this just a note and does money have to move? Man our government is greedy, make it simple, make all interest tax deductible.
@ Chris L – And then you get inflated property values and a built in incentive for homeowners to take out massive lines of credit.
Bad idea.
I could care less about what other people do with their tax deductions. I could use a tax break as could most Canadians and I certainly wont contribute to running up the bubble any further trust me. Tax cuts are always a good thing for average earners, always.