Interest Deductibility

We’ve discussed the deductibility of principal residence mortgage interest in the past.  There are various ways to attempt it, and its widely used, but CCRA doesn’t like it.  Incurring an interest expense for the purposes of earning a profit is pretty well accepted.  What is off limits is misusing or abusing the rules in order to avoid tax. In other words, you can use the rules to avoid tax, but you can’t misuse or abuse the rules to avoid tax.  Clear?  Didn’t think so 🙂

Anyway, blog readers have pointed out that what appears easy may in fact be difficult, if not downright dangerous.  I’m not a tax accountant and I’m not advocating any particular course of action, implicity or otherwise.  Many people effectively structure otherwise non-tax deductible debt in order to make it deductible.  Many people incur interest expense in order to reduce income tax, accepting that they will sometime (even if at time of death) become liable for capital gains taxation (the limit of which was recently bumped up).  If you want to do this, get professional advice.

 Meantime, Fiancail Post Tax Expert Jamie Golombek reports that the celebrated Lipson case is heading for the Supreme Court. Its an interesting read.



Filed under Investment Approach, National Post

4 responses to “Interest Deductibility

  1. abc

    The Lipsons/Singletons deserve the order of Canada for winning that case. T

  2. abc

    oooops, I meant Singleton and his client…

  3. mike


    The GAAR (general anti-avoid rules) really sucks. Fortunateley, I don’t think a lot gets forwarded on to it.

    Not only do we have to deal with obscure freaking rules, but we also have to deal with the fact that the rules might not apply. Yeesh!

  4. jrf

    Comment from mike: “Fortunateley, I don’t think a lot gets forwarded on to it.”

    My comment: Yet. The law (i.e., jurisprudence) on GAAR is just starting to form… and the news is not good for the taxpayer so far.

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