LOC important question

[Fly]

I`m new at this. Please if you can help I would appreciate it. I put an offer (and it was accepted) on a house that I want to rent out. I`m waiting for the bank approval but before I sign which will be sometime next week, I want to make sure I`m going about it the right way.
I own my own home. Just finished paying it off. If I use a LOC on my home to finance the rental home, is it going to be okay for the income tax? Meaning if my mortgage payment is lets say $1,000.00 per month and the rental is lets say also $1,000.00 per month will I be able to use this amount in order to not make a profit at the end of the year so that I don`t pay income tax. Because a LOC I choose the amount and lets say I want to pay a fixed amount of $1000.00 per month instead of only the interest. Will the government reconize that the mortgage makes sense of my monthly payments of $1000.00 as opposed to a fixed morgage payment? And since the loan is not directly on the rental can I still deduct my mortgage and interest for my income tax?

I hope you can help,

Fly

 

[bizaro86]

It doesn`t matter if you use a LOC on your house or a direct mortgage on the property for income tax purposes. However, either way, you can only deduct the interest portion of your payment. The principal is not tax deductible. But all the other expenses that go along with owning a rental are also tax deductible (insurance, maintance, utilities, condo fees, etc).

Michael

 

[MikeMcCrae]

I have seen many deals lost because of a fear to pay tax. I have always found that CCRA doesn`t want any money if I don`t make any money. If you borrow money for investment from your home as Michael stated only the interest is deductible. Unfortunately sometimes we have to live with profits. (on which we are taxed)