Easing the tax hit for investment property owners

Easing the tax hit for investment property owners

The Globe and Mail | April 21, 2011

Whether it’s a duplex, a cottage or a Florida getaway, a second property can be a rewarding investment over time. But if you’re not careful, it can prove taxing as well. A little planning goes a long way.

The following are some common mistakes financial planners see in their practice, as well as some tips for minimizing the tax hit.

Rental properties

If you borrow money to buy or repair a rental property, make sure you arrange things so that the interest on the loan is tax deductible. That means keeping mortgages and lines of credit for the rental property completely separate from loans taken out to buy or improve your principal residence, which are not tax deductible.

“You can’t unmix money,” says Warren Baldwin, regional vice-president of financial planning firm T.E. Wealth in Toronto.

For full article at original source.

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