When you take out a mortgage loan, it is easy to underestimate your total cost including the interest. Imagine you take out a $100,000 mortgage for 25 years with a 5% interest rate. After just 5 years, you will have paid approximately $23,500 in interest, while your remaining balance will be $88,500. By making the interest part tax-deductible, you could reduce your borrowing cost by $11,700. Surprising, isn't it?

Did you know that it is possible to deduct the interest you pay on your mortgage from your taxable income? This possibility exists, but of course, it is subject to certain conditions.

The conditions:

Whether you are self-employed, a non-incorporated professional, or a rental property owner, you may benefit from this advantage. In fact, you can deduct the interest on your loan if the money you borrowed generates any income for you. This can be rental net income or business income, for example.

However, you cannot structure all your loans in a way that makes your interest deductible! I recommend reaching out to me so that I can guide you on the next steps.

Debt restructuring:

To restructure your debts, you can use a commonly known method called ‘’Cash Damming". However, you need to be organized with your finances to achieve this correctly. First, you open a new account at the bank with a line of credit that will serve as a cushion for your business or rental property-related expenses. Since you are using this line of credit for business purposes, the interest can be considered deductible when filing your tax return. However, it is crucial that all income from your business or rental property is deposited into this same account to be used for repaying debts that can't be included in the calculation.

You can then use your rental or professional income to repay your debts as quickly as possible, only resorting to the line of credit to cover deductible business expenses. In a few years, the interest on all your loans can become tax-deductible.

Unfortunately, this strategy is not accessible to everyone, but there are various techniques you can use to manipulate your assets and debts to make them as tax-deductible as possible. I can help you with this!

Beware of contamination!

Unfortunately, you can't deduct the interest from your taxes if you used the borrowed funds as employment income or capital gains, or if you used them for personal purposes. It's important to implement strategies to avoid mixing things up and ending up with a non-deductible portion.

We highly recommend reaching out to us so that we can guide you through the process. We have more than one trick up our sleeve! We can help you achieve significant savings.

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