Consider all the numbers. Sometimes the lowest loan payment is not always the best way to achieve your goals. You should pay as much as you can comfortable afford to lower your overall cost of interest.
Arrange debt to avoid having to pay tax on the interest
Get All the Tax Breaks Your Can
One of the oldest proven methods (used by wealthy Canadians) is to arrange debt to avoid having to pay tax on the interest. You can use the same strategy, and over time, it can result in sizeable tax returns.
When it comes to the tax angle, there are two kinds of debt - good debt and bad debt.
- 1. With bad debt, which includes credit cards and car loans we have to pay interest with after-tax dollars.
- 2. Good debt consists of any debt incurred from business expenses, business investment, stocks, or equity mutual funds. Interest on all these is tax-deductible.
The tricks we're going to show you involve swapping bad debt for good. However there are two things you should keep in mind:
- 1. Make sure your credit rating is in order, and you have proven to yourself that you can handle debt.
- 2. When implementing our tips, work with an accountant or a certified financial advisor.
Tips To Turn Bad Debt Into Good Debt
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Convert Mortgage Debt into Tax Free Debt Using an Existing Asset
Convert Mortgage Debt into Tax-Free Debt Over Time
Transfer Mortgage Debt to a Business or Rental Property
Use an RRSP Loan to Reduce Your Taxes
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