Your mortgage penalty may be tax deductible

There’s one piece of good news about mortgage prepayment penalties: The cost of the penalty can be used as a tax deduction if you are breaking your mortgage to move 40 km or more to be closer to work.. 

The Canada Revenue Agency has a provision that allows you to deduct the costs of  moving, if you are doing so to for  a job or for full-time study at a university, college or other type of course at a post-secondary  level.  You can claim other costs associated with selling your old residence as well: advertising, notary or legal fees, real estate commission as well as that dratted mortgage penalty “when the mortgage is paid off before maturity.” 

 

 Keep the receipts and fill out form T1-M Moving Expenses Deduction. For tax purposes, the mortgage penalties get lumped under “other selling costs, specify” on Line 16 of the T1-M form.  Keith Brooks in media relations with the CRA says the earlier in the year you move, the better, since you can only claim deductions from the employment or self-employment income you earned at your new work location.

 

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Gaya Chudnovski

Gaya Chudnovski

Sales Representative
CENTURY 21 Heritage Group Ltd., Brokerage*
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