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RE: MAKING "ANY" INTEREST Deductible
Hi David
I was reading your newsletter yesterday about making the
Mortgage interest deductible . It is a very well written
newsletter . However, I was trying to find a way to take
money on LOAN from the bank for RRSP and making it
deductible .I have money to put in RRSP but getting a loan
from bank at 4.4. % is not a bad deal when I can put that
loaned money at 2.5% GIC and also my own money at another
2.5% , So I make MORE by borrowing than putting my ownand
be liquid at the same time. It is just that I am losing all
the interest to them .
Just wondering if there is a way to get this interest
deductible . I do NOT own property but have a sole
propreitorship registed in BC . Is there a way that I can
make the arrangement with the bank to loan to my business
and then put money to my RRSP as a collateral for it or if
there is another simple way .
Thanks always
====================================================
david ingram replies:
This assumes a $10,000 amount in hand or borrowed
Making a non deductible loan at 4.4% to invest at 2.5% makes no sense whatsoever unless you reversed the figures in your question. At a 40% tax bracket, you will have to earn $700 and pay $280.00 tax to have $420 left over to pay the interest and still be $20.00 short.
At the same time, you would have to (sometime in the future) pay (40% of $250) pay a $100 tax on the $250 interest you received and only have $150 left over. You would have to make more than four times as much to break even.
Take the money from your proprietorship and buy your RRSP. Then if you are short, borrow money to make deductible business expense.
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