# tax deduction regarding loan to invest pre-construction



## lollypopoh (Apr 5, 2009)

Would the interest be tax deductible when using Secured Lineof Credit to invest in pre-construction? Using SLC for down payment for something you will not own until 2013 or 2014, would that consider an investment, and thus tax-deductible? When can I actually claim the interest to CRA?


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## iherald (Apr 18, 2009)

lollypopoh said:


> Would the interest be tax deductible when using Secured Lineof Credit to invest in pre-construction? Using SLC for down payment for something you will not own until 2013 or 2014, would that consider an investment, and thus tax-deductible? When can I actually claim the interest to CRA?


Are you not putting money down for what will be your principal residence? if so, then no. If you sell it, and report the profit, I would go back and add the interest as deductible. Otherwise I suspect you'd be in for an audit by trying to write off this interest.


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## lollypopoh (Apr 5, 2009)

iherald said:


> Are you not putting money down for what will be your principal residence? if so, then no.


Thx for your reply. I am making regular mortgage payment on my principal residence which I could qualify SLOC from. (I don't quite follow why you mention putting money down on my principal residence. Please forgive me) I am investing in pre-construction condo by using SLOC hoping when its built, I can either sell it or use it as rental property.


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## cardhu (May 26, 2009)

I believe the interest would *not* be deductible, because your investment cannot produce income (how do you persuade a tenant to pay rent for a place that doesn’t yet exist??). When the condo is built and becomes inhabitable, and you begin to place tenants into it, then the interest may become deductible from that point forward. However, you mention that you may just flip the place for a profit, in which case, none of your interest would be deductible, now or in the future. 



iherald said:


> If you sell it, and report the profit, I would go back and add the interest as deductible.


It doesn’t work that way ... it makes no difference whether OP sells for a profit or a loss, nor whether they report that profit/loss ... none of that has anything to do with determining interest deductibility ... the key is whether the investment can produce income ... and it can’t produce income during a period in which it doesn’t yet exist ... so its unlikely there would be any “going back” to deduct interest retroactively.


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## lollypopoh (Apr 5, 2009)

cardhu said:


> I believe the interest would *not* be deductible, because your investment cannot produce income (how do you persuade a tenant to pay rent for a place that doesn’t yet exist??). When the condo is built and becomes inhabitable, and you begin to place tenants into it, then the interest may become deductible from that point forward. However, you mention that you may just flip the place for a profit, in which case, none of your interest would be deductible, now or in the future.
> 
> 
> It doesn’t work that way ... it makes no difference whether OP sells for a profit or a loss, nor whether they report that profit/loss ... none of that has anything to do with determining interest deductibility ... the key is whether the investment can produce income ... and it can’t produce income during a period in which it doesn’t yet exist ... so its unlikely there would be any “going back” to deduct interest retroactively.


Thanks, what you say here makes a lot of sense to me.


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