Unlike Americans, Canadians can’t deduct mortgage interest on their primary residences. However, you can deduct interest paid on an income property—and it’s not just on the mortgage either, says CPA Allan Madan. Rental owners can make deductions against a line of credit used to fund renovations, and even against money borrowed for a down payment. With such low rates, Madan says borrowing to buy or fix up a rental is smart. “You’re increasing your rent and the value of your property, and you can deduct those borrowing costs.” Just remember: You have to be collecting rent for the deduction to count.
The bottom line: Reduce your taxable income dollar for dollar on what you’ve spent. So if you paid $30,000 in interest on an income property-related loan, you can reduce your income by that exact amount.
More tax tips here.