Make part of your mortgage tax-deductible.
Own a rental and a home with a mortgage? Your rent can pay your home off years faster while your rental costs turn into tax deductions.
How it works, live with your numbers
1
Your rent comes in
Every month your tenant pays you.
Rental income / yr
$
$2,500 a month goes straight onto your home mortgage.
2
It pays your home down
All of it lands on the mortgage that saves you nothing.
Home mortgage
$
Rate
%
Your $600,000 mortgage is gone 14.2 years sooner.
3
A line pays the rental bills
Property tax, condo fees, repairs: paid from a dedicated line of credit, not your pocket.
Rental expenses / yr
$
Line rate
%
$20,000 of rental bills a year now paid with borrowed money.
4
That interest saves you tax
Borrowed money that runs a rental is tax-deductible. Your debt moved to the side the CRA rewards.
Your tax bracket
At your bracket that is $6,114 back every year by year 15.
Tax saved / 15yr
$58,843
illustrative
Deductible built
$216,667
by yr 15
Mortgage sooner
14.2 yrs
vs no strategy
Recurring / yr
$6,114
on the balance
Illustrative only. Your accountant confirms deductibility for your facts; the deduction comes from borrowing to pay rental expenses, not the rental income.
Common questions
What is cash damming?
A CRA-recognized cash-flow strategy. You apply your rental income to your non-deductible home mortgage, and pay your rental expenses from a dedicated line of credit. Because that borrowed money earns rental income, its interest becomes tax-deductible. Over time your debt shifts from the non-deductible side to the deductible side.
Is cash damming legal in Canada?
Yes. The Canada Revenue Agency describes it by name in Income Tax Folio S3-F6-C1 and confirmed it in a technical interpretation. It works when the borrowed money genuinely earns income and the funds are kept cleanly traceable. Your accountant confirms deductibility for your specific facts.
Do I need a rental property?
Yes. Cash damming requires rental income (or an unincorporated business). You also need a mortgage on your own home to convert, and a readvanceable mortgage or line of credit.
Does this make me money right away?
It builds over time. The deductible balance grows each year, so the tax benefit starts small and compounds, while your rental income pays your home mortgage down years early. It is a long strategy, not an instant refund.
This page is mortgage structuring and education, not tax, legal, or accounting advice. Whether interest is deductible depends on your specific facts and is determined by your accountant and the Canada Revenue Agency. The strategy is described in CRA Income Tax Folio S3-F6-C1 and rests on Income Tax Act 20(1)(c). It only works when the borrowed money genuinely earns income, the funds are kept cleanly traceable in a dedicated account, and proper records are kept. All figures shown are illustrative examples and your results will differ. Confirm with a qualified accountant before acting, and involve a lawyer for any title, ownership, or security matter.