I often hear people complain that we don't get to deduct mortgage interest on our taxes like they do in the US. While at tax time that sounds like a total rip off there is an upside to this.
If you bought a home in the US and sold it for a profit you must pay capitol gains tax on the money you made. In Canada we get to keep it. (shhhhhhh, don't tell anyone). Take a look at any amortization schedule and see how much of a payment is going to interest and how much to principal. The portion that actually pays down the debt is your savings. When you sell house add up the amount you have paid towards the principal plus what you have made on the sale over and above the purchase price. Voila - savings! And it's tax free.
Now I know some would argue that you have paid the bank a whole bunch of interest so to keep everyone happy let's include those numbers. So add up all the interest you have paid to the bank. Now try to estimate what a rental would have cost you a month (you have to live somewhere). Subtract the the interest paid to the bank from the amount of rent you would have paid and see if you win. Did you pay more in interest than you would have paid in rent? It's very rarely the case.
My point is owning a home and being sensible about repaying the mortgage loan is the best tax free savings you will ever have. There is no cap!
If you have any questions or if you just want to argue the point please feel free to comment and let's start the discussion.
No comments:
Post a Comment
Your comments are not only welcomed but encouraged. It is not expected that you will always agree with what I have to say. After all, it's an opinion.