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Smith Maneuver

 

Making your Mortgage Tax Deductible

As stated above, mortgage interest is not tax-deductible in Canada. Mortgage payments are made with money that our clients have already paid tax on – after tax dollars.

The exception to a mortgage not being tax-deductible is if the money is borrowed for a business purpose, in other words, to create more money. Generally, interest on borrowed money is deductible if the money is borrowed to earn investment or business income.

To make the interest deductible on an existing mortgage on your house, you must have income producing assets. The idea is to take these assets and swap them for mortgage debt. Please discuss with your accountant.

Once this asset swap is completed, you will own an equal amount of investment assets, and you still have a mortgage on your home. But because you borrowed against your home (in the form of a mortgage) in order to buy assets that create wealth, the interest on your mortgage is now tax-deductible. You have just given yourself a giant tax break.