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Is the mortgage interest tax deduction a thing in Canada? Only halfway. You can’t deduct interest on the mortgage for the home you live in, but you can when the loan was used to earn income, most often on a rental property. On $30,000 of rent in Ontario, $8,000 of mortgage interest cuts the tax from $7,218.65 to $4,744.00.
What decides whether mortgage interest is deductible?
What the borrowed money did. The Canada Revenue Agency allows interest as a cost only when the money is used to earn income from a business or property. The interest must also be paid under a legal obligation, and the rate has to be reasonable. Your own home fails the first test, because a home you live in doesn’t produce taxable income.
The name of the loan doesn’t matter. A mortgage is only a loan, and if it bought a rental unit the interest can be a cost. If it bought your house, it can’t.
What can you deduct and what can’t you?
| Situation | Mortgage interest | Mortgage principal |
|---|---|---|
| Home you live in | Not deductible | Not deductible |
| Whole property rented to tenants | Deductible against the rent | Not deductible |
| Part of your home rented out | Only the share for the rented area | Not deductible |
| Refinance used for personal spending | The added interest is not deductible | Not deductible |
On a rental, the CRA is clear that repaying principal is never an expense. Land transfer tax paid when you bought isn’t deductible either. Interest and bank charges sit on their own line of the rental form.
How much does it save an Ontario landlord?
Picture a landlord who collects $30,000 of rent in a year and has $80,000 of other income. Property tax, insurance and repairs come to $6,000, and mortgage interest is $8,000.
Leave the interest out and net rental income is $24,000. The rental income tax calculator shows $7,218.65 of extra tax on that. Put it back in and total costs are $14,000, net income is $16,000 and the extra tax is $4,744.00. The interest saves $2,474.65, or about 31 cents on every dollar of it.
That saving follows the landlord’s tax rate, not the size of the mortgage, so someone in a lower bracket saves less per dollar. Change your other income in the calculator and you’ll see it move.
What if you only rent part of your home?
Then you claim the part of your costs that relates to the rented area, say a basement or a room. Shared costs get split between personal and rental use, often by floor area or number of rooms. Costs that belong only to the rented space count in full. The CRA also says you can’t claim any of it if you have no reasonable expectation of profit.
A simple picture: Dana rents out a basement that takes up a quarter of her home’s floor area. If her yearly mortgage interest is $12,000, a quarter of it, $3,000, is the share tied to the rented space. The other $9,000 stays personal and gets no deduction. Her actual split could differ if the rooms are used differently, so she’d want a method she can explain.
Before you buy a home with a suite, check that the numbers work. The rental property calculator estimates cash flow with interest, taxes and vacancy, and the mortgage calculator shows the payment and the interest over the life of the loan.
What records should you keep?
Keep the lender’s yearly statement showing interest paid, the lease or rent receipts, and anything that shows where the borrowed money went. If you refinance and spend part on the rental and part on yourself, a note of each amount saves a lot of guessing at tax time. Records also let you answer a question quickly if one ever comes your way.
Where do people go wrong?
- Deducting the whole mortgage payment. Only the interest part can qualify, and only for an income-earning use.
- Borrowing against the house for a car or a trip, then deducting the interest. Personal use kills the deduction.
- Mixing personal and rental space with no clear split.
- Forgetting the property may be sold one day, which can trigger a gain. The capital gains tax calculator shows what that could cost.
Our rental figures leave out capital cost allowance, and the tool gives no tax benefit for a rental loss. Mortgage rules can change too, so run the rate you’re offered through the mortgage affordability calculator before you count on any saving.
Our sources
The interest rules come from Canada Revenue Agency pages on rental expenses and from its income tax folio on interest deductibility, read in September 2026. Tax steps are the 2026 federal and Ontario figures used in our calculators. We left out some home buyer credits and incentives because we couldn’t confirm their 2026 details. We aren’t a government service and we don’t speak for one.
Frequently asked questions
Can I deduct mortgage interest on my home?
No. Interest on a loan for a personal home isn't deductible, because the home doesn't earn taxable income.
Can I deduct interest on a rental property?
Generally yes, when the loan was used to earn rental income. Principal repayments are never deductible.
How much does the interest save a landlord?
In our Ontario example, $8,000 of interest cuts extra tax from $7,218.65 to $4,744.00, a saving of $2,474.65.
What if I rent part of my home?
You can claim only the share of expenses that relates to the rented area, and you must have a reasonable expectation of profit.
Is interest on a refinance deductible?
Only the part tied to an income-earning use. Interest on money spent personally isn't deductible.
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