# Rental Property Mortgage Interest Deduction



## Solidify (May 8, 2017)

Without going into specifics (yes I know I need to speak with my CPA), is there a general formula for determining how much money will be returned to me on the amount of rental property mortgage interest I declare?

For example, I paid 5,760$ this year on mortgage interest alone for my rental property. I'm trying to figure out what computation is used to determine how much of that will be reimbursed.


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## Just a Guy (Mar 27, 2012)

Depends on your tax bracket and I believe the number of properties you own. It used to be you needed to own at least three properties to qualify for all the deductions available to landlords.


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## gardner (Feb 13, 2014)

Just a Guy said:


> used to be you needed to own at least three properties to qualify


I'm confused. Is this something other than the deductability of interest on loans used to generate investment income?

https://www.canada.ca/en/revenue-ag...al-expenses-you-deduct/interest-expenses.html

If we are only discussing the deductibilty of interest expenses, then the tax savings will depend on your marginal rate. It could be from nothing to just over fifty percent of the interest in question.


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## Just a Guy (Mar 27, 2012)

Yes, upgrades, travel to and from to inspect, tools, your accountant, etc. There are many tax deductions for landlords.

https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/t776/t776-fill-17e.pdf

https://www.canada.ca/en/revenue-ag...state-rentals/rental-expenses-you-deduct.html

https://www.canada.ca/en/revenue-ag...ns/publications/t4036/rental-income-2016.html


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## gardner (Feb 13, 2014)

Just a Guy said:


> There are many tax deductions for landlords.


Sure. But the title of the thread is "Rental Property Mortgage Interest Deduction" -- so my take was that Mortgage Interest was the focus.
I'm not aware that mortgage interest deductibility is contingent on the number of properties owned.


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## Just a Guy (Mar 27, 2012)

There used to be a rule, back when I started, that owning less than 3 properties, the government didn't consider you to be in the "business" of rental properties, so they limited the deductions available...

That rule could have been overturned, I've been a landlord a long time and I've always hired an accountant to deal with the taxes, not to mention I'm well over 3 properties.


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## Numbersman61 (Jan 26, 2015)

Just a Guy said:


> There used to be a rule, back when I started, that owning less than 3 properties, the government didn't consider you to be in the "business" of rental properties, so they limited the deductions available...
> 
> That rule could have been overturned, I've been a landlord a long time and I've always hired an accountant to deal with the taxes, not to mention I'm well over 3 properties.


There has never been such a rule regarding interest deductibility. The one rule you must remember is that you cannot create a loss from your rental property by claiming capital cost allowance. First you deduct all cash expenses (including mortgage interest) related to the rental property. Then you deduct CCA expense up to extent of the remaking profit.


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## Just a Guy (Mar 27, 2012)

I never said the rule applied to interest deductions, I said it applied to getting all the deductions.


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## Solidify (May 8, 2017)

Just a Guy said:


> Depends on your tax bracket and I believe the number of properties you own. It used to be you needed to own at least three properties to qualify for all the deductions available to landlords.


We are four tenants in common on this single rental property. We don't own any other rental properties. This rental property in question is a quadplex (we live in the main dwelling and rent out the other 3).

Assuming we all know our tax bracket, how do I calculate the return we'd get from the deducted interest? An example would help.


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## nobleea (Oct 11, 2013)

Solidify said:


> We are four tenants in common on this single rental property. We don't own any other rental properties. This rental property in question is a quadplex (we live in the main dwelling and rent out the other 3).
> 
> Assuming we all know our tax bracket, how do I calculate the return we'd get from the deducted interest? An example would help.


Assuming you're well in to your current marginal bracket, then interest*marginal rate=reduction in taxes.

If the interest amount if big enough, or your closer to the lower end of your current marginal tax rate, then it could be lower as some of the deduction would be at the current rate and some would be at the marginal tax rate below.
So if you're in the 40% marginal tax rate, you'd get back $2300 (assuming no refunds are taxes due from other reasons).
Certainly helps if your rental income exceeds all the deductions you are claiming on it (interest, utilities, insurance, etc).


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## Pluto (Sep 12, 2013)

I think it would go something like this:

1. Calculate the % of the property rented out. Lets say 75% because you live in one unit, but only you would really know the exact %. this is just an example. You can't deduct interest expense for the % of the property you live in. 
2. 75% of 5760 = 4320
3. In this example, 4320 should be deducable from income as an expense. Stated another way, it reduces your taxable income by 4320.


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## Just a Guy (Mar 27, 2012)

Well, that would be an overall savings, then you need to take into consideration the ownership percentage...and divide it up by that. Don't forget you also need to claim the income.


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