# Is interest on heloc tax deductible in my case?



## Paul22 (Jan 25, 2014)

Hi everyone,

I own two houses, one my principal residence and one my cottage. My principal residence has a mortgage and my cottage does not. I have had the cottage appraised and am in the process of getting a scotia "step" line of credit on it so I can buy an income property. Many people have told me that since the line of credit is on my own property and not on the income property that I will not be able to deduct the interest I pay on the line of credit from the rental income. I believe they are wrong as I am only using the the cottage to secure the line of credit but I have found it hard to find out who is right. The line of credit will be set up so the income property has its own separate account so interest paid on the line of credit for the income property will be clear to the cra. I am hoping people here will be able to sort this out.

Thanks


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## stardancer (Apr 26, 2009)

Keep very good paper work; if you can prove that the proceeds of the line of credit went directly towards purchasing/fixing up an income property, then the interest is tax deductible against the income from that property. Do not use the line of credit for anything else but the income property until you are finished with it; do not mix up personal and income-producing expenses.

CRA looks at the use of the funds, not the securement, when determining if the interest is tax deductible.


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## Canadian (Sep 19, 2013)

stardancer said:


> CRA looks at the use of the funds, not the securement, when determining if the interest is tax deductible.


+1


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## marina628 (Dec 14, 2010)

Just don't mix any personal stuff with this credit line and it should be fine.


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## Paul22 (Jan 25, 2014)

Thanks everyone for your help.


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