Tax Tips for Your Second Mortgage in Canada

Getting a second mortgage is a great idea for people who want to take advantage of the equity that they’ve built up within their home over the years. The cash that you can get in hand from one can be used to pay for any number of things such as a college education, a great vacation, or value-adding home renovations. However, that doesn’t mean that the tax man won’t come calling at some point. There is no way around it. Here are some tax tips for your second mortgage in Canada.

Interest from loans on your personal residence

Unlike other countries, the federal income tax code in Canada does not allow a deduction to be made for interest paid on loans from your personal residence. This means that any interest you pay on the home that you live in does not come off of your tax bill at the end of the year. While this can prove difficult for some homeowners, there are other advantages that the tax code gives.

Capital gains tax

According to the CRA, when you sell your home you will not incur a capital gains tax if the property was your principal residence for every year you owned it. This means you do not have to report the sale on your income tax. This is a big advantage for homeowners who can successfully pay off their mortgage, and sell their home when the value appreciates, making the investment of getting a mortgage all the more profitable in this country.

When you use your second mortgage to invest

A very popular move for Canadian homeowners is to use a second mortgage to make an investment, for example into rental properties or other areas. The interest on a mortgage or second mortgage then becomes tax deductible in many instances. It is important to remember that if you use your funds for making money in other areas aside from your personal residence, then you will be liable for taxes. However, many citizens try complex maneuvers with their money to try and make the mortgage on their primary home tax deductible.

The tax code of every nation is incredibly complex. These are some basic tax tips on your mortgage in Canada.  If you need help navigating this complex field, or more guidance on whether or not now is the right time to get a first or second mortgage, then contact the experts at Kupina Mortgage Team. We can help you achieve your goals.