How to make your mortgage interest tax free in Canada

Deer high tax payer lovers,

As you might know, in the US, your house interest payments are tax free.

Unfortunately, rules aren't the same in Canada but.....you can do a double swap to make it tax free.

How? If you have investments outside your RSP :

• withdraw it and pay your mortgage
• then borrow back to money secured by a mortgage and put back the money in our investment portfolio

Revenue Canada says that all the interest you pay on money you borrowed to make an investments in tax deductible.

Isn't that wonderful?

Not sure you get it?

Basically, if you have non RSP investments and a mortgage you should pay your mortgage with your investments and reinvest from your line of credit. Bottom line, you still have the same amount of dept but your interest are tax-free. So, isn't that wonderful? Check the glob and mail article refer bellow. 

Reference: 

P49:  http://nownetworkjointventures.com/wp-content/uploads/2013/12/10-Secrets-CRA.pdf

Warnings:

• Make certain that the new mortgage was needed by the bank to secure your loan to buy investments
• Do not purchase the exact same investments you held prior to paying your mortgage. You should purchase new investments. 

More information: 

• Glob and mail: The Smith Manoeuvre: A Canadian mortgage tax-deductible plan (Published Tuesday, Sep. 03 2013, 6:00 AM EDT)
• My own advisor: Should I implement the Smith Manoeuvre?
• Line 221 - Carrying charges and interest expenses
• fees to have someone complete your return, but only if:
  • you have income from a business or property;
  • accounting is a usual part of the operations of your business or property; and
  • you did not use the amounts claimed to reduce the business or property income you reported (see Interpretation Bulletin IT-99, Legal and Accounting Fees);
• most interest you pay on money you borrow for investment purposes, but generally only if you use it to try to earn investment income, including interest and dividends. However, if the only earnings your investment can produce are capital gains, you cannot claim the interest you paid. For more information, contact us;