Can I deduct mortgage interest on my home in Canada?

Generally, no. Unlike the United States, Canada does not allow homeowners to deduct mortgage interest on a personal residence from their income. The federal Income Tax Act permits interest deductions only when borrowing costs are incurred for the purpose of earning income from a business or property. A mortgage on your principal residence does not meet this test because the home is generating no taxable income.

There is one planning strategy — sometimes called the "Smith Manoeuvre" — that involves converting non-deductible home mortgage debt into deductible investment borrowing over time. The strategy requires careful execution and has specific tax compliance requirements; it is not something to implement without professional advice.

If you rent out a portion of your home or use a dedicated home office for business, you can deduct a proportionate share of mortgage interest related to that portion as a rental or business expense. The deductible percentage is generally based on the proportion of floor space devoted to income-earning use. Home office deductions for employees (as opposed to the self-employed) are subject to additional restrictions under the Income Tax Act.