Can having a loan impact my tax return?
Whether you file your income tax online, by paper or in person with a tax preparation agency, knowing how borrowing money can affect your tax refund could benefit you in the long-run.
Let’s consider three major loan types and how — or if — they impact your taxes.
The money you borrow through a personal loan does not count as income, which means you don’t have to pay taxes on it. Canadian consumers also cannot claim the interest paid on personal loans for a tax credit.
The bottom line: No impact on your tax return.
Interest paid on your primary mortgage isn’t tax deductible. But, if you’ve used a mortgage or your home equity to purchase an income property or another income-generating investment, you may be able to claim the interest on those debts (you can read more about it in the Globe & Mail or on Investopedia).1, 2
An accredited financial advisor can also be a great resource if you’re interested in learning more about tax deductible mortgages or income-generating debt.
The bottom line: Most mortgage loans are not tax-deductible.
If you’ve received a federal, provincial or territorial student loan, or a loan under the Canada Students Act, you may be able to claim some or all of the interest paid on your student loan during any of the past five years.3 However, if you renegotiated your student loan with another bank or financial institution, the interest you pay on your new loan may not qualify for a tax credit.
The bottom line: Loans under the Canada Students Act may be tax deductible.
Resources to save you time and tax headaches
Many companies offer free software to help you file online. For more information and resources on filing your taxes, check out the Canada Revenue Agency’s (CRA) website. If you’re looking for tax-season tips and advice, view the CRA’s view the CRA’s General Income Tax and Benefit Package for 2016.
Worried about your tax bill?
If your budget is tight and you need a little extra to help see you through tax season, reach out to your local Fairstone Lending Specialist. A personal loan is a quick, hassle-free loan that can help you get the money you need. Apply securely online for a personal loan today.
This article is for informational purposes only. For personalized financial advice, you should contact a qualified financial advisor.
1 MacEachern, Ayton. “Creating a Tax-Deductible Canadian Mortgage.” Investopedia. Investopedia.ca, 14 July 2008. Web.
2 Globe Money. “The Smith Manoeuvre: A Canada Mortgage Tax-deductible Plan.” The Globe and Mail, Investopedia, 03 Sept. 2013. Web.
3 “Line 319-Interest Paid on your Student Loans.” Canada Revenue Agency. Government of Canada, 05 Jan. 2016. Web.