What The Experts Say

Is Your Mortgage Tax Deductible?

by Einar Lisborg, BA RHU Financial Planner

 Canadians pay a high amount of tax compared with other developed nations. Most of us don’t even mind paying tax if we get the services we pay for. Today however, we see our social safety net, universal health care, education and even emergency services straining and possibly failing if the media is to be believed. Government spending scandals are relatively frequent and it is my opinion that most Canadians have lost confidence in their elected politicians to manage our public finances

It is literally raining taxes!

When you examine your own situation, how much of your gross income goes to pay the interest cost on your mortgage, car loan, credit cards, and other personal debt?  How much income tax do you pay?  When you add up both totals, you may find that you have less than 50% of your net income to live on.  To make matters worse, when you spend the amount left over, you may still pay 5% GST, 7% PST, and a host of other hidden taxes and duties.  It is literally raining taxes!

As a Financial Planner, I have been trained to teach people to save money, invest wisely and plan for the future. The problem is most people have more than enough trouble keeping up with the expenses of life, never mind having enough money to build wealth.

As you can see, just paying your interest costs and taxes can take most of what you have. The concept presented in this report is not the solution to the entire problem, but it is the best place for most people to start. Most Canadians own a home or plan to own a home.

It usually takes 25 years to pay off the mortgage at which time they begin to save money and invest a little bit. Wealth accumulation takes a long time. Look at pension funds. They invest money over 35–40 years at which time they can begin paying out decent pensions.

If you are planning to invest for retirement you also need a long period of time for the accumulation to really pay off. If you take the first 25 years away by paying off your mortgage, you are limiting and reducing the amount of money you will have at retirement. We are living longer, but few of us believe that the Old Age Pension or even the Canada Pension Plan will be enough.

…most of us are living on less than a third of what we make

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