Tax Deductible Mortgage Interest

FAN2018144-200x300Mr. Smiley, a married 45 year old junior executive has a $300,000 home mortgage. He has a company defined benefit plan which limits his RRSP contribution room, and earns more than $100,000 per year.

He recently inherited $200,000 and came to Claudio for investment advice. While he new it was important to pay down his mortgage, Mr. Smiley also wanted to invest some of the inheritance for his retirement.

Claudio’s Recommendation:

Claudio suggested Mr. Smiley pay down his mortgage by $200,000, and take a secured line of credit for the same amount. Mr. Smiley would then use the line of credit to purchase a portfolio of dividend paying stocks and mutual funds.

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This line of credit is considered an investment loan and the interest paid is tax deductible. Mr. Smiley now gets an additional tax deduction of approximately $7,000 per year. His portfolio earns approximately $12,000 per year, but attracts minimal tax because dividends and capital gains receive preferred tax treatment. A spousal income splitting strategy was also employed. By implementing these strategies, Mr. Smiley saves $6-$8000 per year after taxes which he is using to pay down his mortgage.

This approach can also be implemented for individuals who have non-registered assets and have personal loans and mortgages.

Contact Claudio

Claudio Piron CPA, CA, CFP®, CSWP, TEP
Senior Investment Advisor
Insurance Advisor

HollisWealth
HollisWealth Insurance Agency Ltd.
4 Director Court, Suite 110
Vaughn, Ontario, L4l 3Z5
Phone: 905 712 9302
Fax: 905 712 9330
Email: claudio.piron@holliswealth.com

Investment Industry Regulatory Organization of Canada (IIROC)

Canadian Investor Protection Fund