Loans Canada Launches Free Credit Score Portal And Is Recognized As One Of Canada’s Top Growing Companies
Loans Canada is pleased to announce it placed No. 131 on the 2022 Report on Business ranking of Canada’s Top Growing Companies.
When you own a home, the expenses can seem endless – electric upgrades, utility bills, property tax, plumbing issues, lawn maintenance, you name it. And then there’s the mortgage, with an interest rate that has you spending an extra couple hundred dollars a month without even touching the principal payment, as well as the tax. The worst part is that you can’t even deduct any of these expenses if the home is your primary residence – that’s only allowed if it’s a rental property.
Normally, Canadians aren’t able to deduct their mortgage interest tax from their income during tax time. However, there is a way to achieve this using the Smith Maneuver.
Check out these 6 homeowner tax breaks.
Developed by financial planner and strategist Fraser Smith, the Smith Maneuver is a legal strategy that helps Canadian homeowners turn their mortgage interest into a tax-deductible investment loan. Smith noticed that wealthier Canadians were finding more deductions in their taxes because they had the means to spend more money on expensive accountants. He shared his strategy to level the playing field, and to help low to middle-class Canadians find the same tax breaks.
For the Smith Maneuver to work, you need a re-advanceable mortgage. Similar to a line of credit, a re-advanceable mortgage includes both a mortgage and line of credit that you can borrow from. These are commonly known as Home Equity Lines of Credit (HELOC). Each mortgage payment you make pays down your mortgage while also increasing the amount you can borrow from your line of credit.
The Smith Maneuver converts your mortgage loan or line of credit into an “investment” loan that qualifies for interest deduction during tax season. If you borrow funds from your HELOC and invest them into something that produces income, you can deduct the interest on the borrowed funds from your income.
Check out the new CMHC First-Time Home Buyer incentive.
Follow these steps to set up the Smith Maneuver and start deducting your mortgage interest:
When you buy your first home, make sure the mortgage is re-advanceable. You can also obtain a re-advanceable mortgage when you renew or break your existing mortgage.
Make sure your investments are likely to give more of a return than the cost of interest in borrowing from the HELOC.
Find out what is the maximum tax refund you can get in Canada.
Here are some reasons to consider the Smith Maneuver:
Like any investment, the Smith Maneuver isn’t free of risk. Make sure you consider the following before using it:
With a mortgage that isn’t re-advanceable (non-HELOC mortgage), you’re free and clear once you pay it off. This isn’t the case if you have used the Smith Maneuver, however. Even if you’ve paid all of your mortgage interest, you are still on the hook for paying the interest on your HELOC loan. You can address this in two ways:
Option A: Keep your HELOC forever. This works if you’d like to continue to benefit from the Smith Maneuver and use the loan credit to invest.
Option B: Pay off the HELOC. This works for people who aren’t comfortable carrying a large loan into retirement. To pay off your HELOC, redirect the cash that would have gone toward your mortgage, towards the HELOC loan.
The tax world is often complicated, and it’s hard to know how you can make your taxes work for you. The Smith Maneuver can make you extra money at tax time and is accessible to all homeowners who have at least some appetite for risk.
Rating of 5/5 based on 1 vote.
Borrow up to $50,000 from Fairstone and be automatically entered to win up to $5,000!*
Earn an average 5%¹ cash back at thousands of partners and at least 0.5%² cashback guaranteed.
Build credit while spending money with the Refresh Financial VISA card.
All consultations and conversations with Loans Canada and its partners are confidential and risk-free. Speak with a trusted specialist today and see how we can help you achieve your financial goals faster. Loans Canada and its partners will never ask you for an upfront fee, deposit or insurance payments on a loan. Loans Canada is not a mortgage broker and does not arrange mortgage loans or any other type of financial service.
When you apply for a Loans Canada service, our website simply refers your request to qualified third party providers who can assist you with your search. Loans Canada may receive compensation from the offers shown on its website.
Only provide your information to trusted sources and be aware of online phishing scams and the risks associated with them, including identity theft and financial loss. Nothing on this website constitutes professional and/or financial advice.