First, these opinions are purely academic. I encourage you to consult either a financial or tax professional. Ideally, a combination of the two professionals mentioned. If you need a reference, please contact me directly.

The amount of interest paid pursuant to a legal obligation on borrowed money may be deductible. Consequently, if the purpose of the loan is earning income from property, such as and not limited to, stock or real estate, you should be able to expense the interest on the loan.

First, it would be advantageous for you to analyze your current financial situation to assess the possibility of deducting your interest rate from an admissible loan. Tax authorities from both CRA and Revenu Quebec, do allow you to restructure and organize your existing loans in hope of reducing your taxes paid.

There is also an additional gateway for business owners. Their benefit is two folds: first, they can deduct interest from property acquired for the purpose of gaining or producing income, second, they can also use the same mechanism for the purpose of gaining or producing income from a business. In theory, a business owner can withdraw from their capital account, use the cash to purchase a home and replace the capital account with borrowed money. « Et Voila », make sure to add Mister Singleton on your Christmas card list this year!

In addition, you would be interested in knowing that there is a practice called « cash damming ». For you to expense interest from borrowed money, you need to be able to either link or trace the eligible funds. Therefore, this technique requires keeping separate loan agreements, one for personal use and another for business use. Your Business Expenditures will be centralized in one loan while personal expenditures will be added onto another loan.

A classic example is a medical student who just finished her studies with a personal debt of $150,000. Because financial institutions have a love affair with doctors, they should have no issues underwriting a corporate line of credit for her. First and foremost, she progressively uses her earned income to vacate her personal debt. In turn, all her business expenditures will be added exclusively to her corporate line of credit. And that’s it, you just transform ineligible money, eligible and deductible.