Updated Checked by the Tax-Services.ca editorial team How we check
The mortgage tax deduction in Canada mostly doesn’t exist for the home you live in. Interest on that mortgage isn’t a deduction on your return. It becomes one only when the borrowed money earns income: a rental, a business use of part of your home, or an investment that can pay interest or dividends.
When is mortgage interest deductible?
The CRA’s line 22100 page puts the idea in one line: you can generally deduct most interest on money you borrowed to try to earn investment income. It also says interest isn’t deductible if the investment can only produce capital gains, and it excludes loans to fund an RRSP, TFSA or RESP.
Plenty of people assume they can write off mortgage interest the way it’s done elsewhere. We found no CRA rule that lets you deduct interest on the mortgage for the house you live in. What the CRA does allow depends on how you use the money.
| Situation | Mortgage interest |
|---|---|
| Home you live in | No deduction found |
| Rental property | Interest on money borrowed to buy or improve it is deductible |
| Part of your home used for self-employed work | The business share of the interest is deductible |
| Employee working from home | Not claimable, and neither is mortgage principal |
| Loan used to earn investment income | Most of the interest is deductible on line 22100 |
Principal is never part of it. You deduct interest only, not the part of each payment that pays down the balance.
How much does a rental mortgage save you?
Here’s a made-up landlord in Ontario with $80,000 of other income. The rent is $30,000 a year. Taxes, insurance and repairs come to $14,000. The mortgage is $300,000 at 5% over 25 years, and the amortization schedule puts year one interest at $14,706.
Leave the interest out and net rent is $16,000, and the rental income tax calculator shows $4,744 of extra tax. Put the interest in and expenses are $28,706. Net rent falls to $1,294, and the extra tax is $384. The interest deduction saved about $4,360, and you’d take the same steps every year as the balance shrinks and the interest falls.
That looks like a great deal, but you paid $14,706 of interest to save $4,360 of tax. The deduction softens the cost. It never turns interest into a gain.
What if you live in one part and rent out another?
A duplex or a basement suite is where people get stuck. The CRA’s pages we read talk about a reasonable basis for splitting business costs, such as area. They don’t hand you a fixed percentage for rentals inside your own home, so we won’t invent one. Pick a split you can defend, write down how you got it, and apply it to interest, property tax and the other shared costs the same way each year. Your lender’s year-end statement gives you the interest total to split.
What about working from home?
If you’re self-employed, you may deduct part of your mortgage interest, based on a reasonable split such as workspace area over total area. The CRA says the space must be your main place of business, or used only for business and to meet clients regularly. It also can’t create or increase a business loss. Employees can’t claim mortgage interest for a home office at all.
Run the numbers for your own case in the self-employed tax calculator. Its business income field is after expenses, so subtract your home share first.
Is there any tax break for buying a home instead?
There is one, and it isn’t about interest. The CRA’s home buyers’ amount page lets a first-time buyer claim up to $10,000 on line 31270 for a qualifying home (that page is written for 2025, so confirm the current figure). You must not have owned a home in the year of purchase or the four years before, and you must plan to live there as your main home. It’s a non-refundable credit. At the 14% lowest federal rate that works out to about $1,400 off your federal tax, a one-time bonus, not a yearly deduction.
Mistakes that catch landlords and owners
The worst one is refinancing a rental to pull cash for your own use. The CRA gives the example of a homeowner who refinances a rental to fund a down payment on a personal residence. The extra interest isn’t deductible against the rent. Test that before you sign, with the refinance calculator.
Another trap is vacant land. Interest and property tax on it can only offset rental income, and they can’t create a loss.
The rental calculator lets you add a building cost for capital cost allowance, capped so it can’t create a loss, and it sets a rental loss against your other income. Selling can trigger a capital gain too. Your mortgage payment itself is easy to check with the mortgage payment calculator.
How we checked the figures
The rules come from the Canada Revenue Agency: its rental expenses page, its guidance on business use of home, its home office page for employees and its line 22100 page. Example figures come from our engine, using 2026 tax data for Ontario. This site isn’t affiliated with the CRA.
Frequently asked questions
Can I deduct mortgage interest on the home I live in?
We found no CRA rule that allows it. Interest is deductible only when the borrowed money earns income.
Is mortgage interest deductible on a rental property?
Yes. The CRA says you can deduct interest on money borrowed to buy or improve the rental.
Can I deduct mortgage principal?
No. For rentals and for a business share of your home, only the interest counts.
Can an employee deduct mortgage interest for a home office?
No. The CRA lists mortgage interest and principal among expenses an employee can't claim.
What if I refinance a rental to buy my own home?
The extra interest tied to personal use isn't deductible against rental income.
- Property and tax in Canada: buying, owning and selling
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