Five Ways to Show Your Interest

Gosh it must be great to be a bank. You make money by already having more money than you need.

Think about it: a bank has a bunch of cash just lying around, that they aren’t even using. They lend you some of it, get you to pay it all back, then charge you a little extra for the pleasure. It’s called interest, and in some religions it’s actually considered a sin. It’s also a fact of life in our line of credit, mortgage, Visa and Mastercard world.

On the upside, there are countless forms of interest that can also serve as tax deductions. Here are five of the most popular ones. If one or more apply to you, you could be looking at a bigger refund come Filing Day.

1. Student Loan Interest

If you were still paying off your student loan last year, you can write off the interest you paid. Your bank should have sent you a statement at the end of the year, but if you didn’t get it or can’t find it, just call them and ask them for the figure.

Exceptions: If you consolidated several loans including your student loan, you can’t use this deduction.

2. Interest on loans used to make investments

If you borrowed money in order to buy stocks, bonds, or other investment vehicles, the interest you paid on that money is a tax deduction. It’s even better than student loan interest, because it provides relief from your highest tax rate, while student loan interest only provides relief at the lowest rate.

Exceptions: you cannot deduct interest on loans taken out in order to invest in RRSPs.

The three deductions that follow apply only to people who are self-employed, or who hold a form T2200 from their employer stating that they must pay their own expenses as a condition of their employment.

3. Car Loan interest

Car loan interest is a tax write-off if you use a car to earn self-employment or commission income, or have a form T2200 from your employer stating that the use of a car is a condition of your employment.

Exceptions: As with all car expenses, you cannot write off any amounts for which you have been reimbursed by your employer.

4. Visa, loan or line of credit interest

If you’re self-employed, you may use loans, lines of credit, or credit cards to pay some of your business expenses. The interest incurred on those transactions is a tax deduction. It may seem like a lot of effort to add up all the interest you pay throughout the year. But if you regularly carry a debt, it can really add up to a significant tax deduction.

5. Mortgage interest

If have a workspace in your home and you’re self-employed or have a form T2200 from your employer saying you need to work at home, you can write off a portion of your mortgage interest. Note that you can’t write off the principal you’re paying, only the interest. At the end of the year your bank can provide you with a breakdown of how much you paid toward your mortgage, and what proportion of that was for interest.

Exceptions: You can only write off a portion of this interest. If your workspace takes up 20% of your home, you can write off 20% of the mortgage interest, and so on.