Advisor.ca | Undo interest deductibility mistakes
If your client wants to borrow to invest, you’ve likely told her the good news: she can probably deduct the interest on the loan. You’ve also warned her the investment could fail to return enough to repay the loan. And if she’s considering a mortgage, you’ve told her she could lose her house if things go south. But have you also explained she could make at least part of the loan interest non-deductible with just one transaction?
Here’s why. CRA permits clients to deduct interest costs of an investment loan as long as it meets three conditions: