Leverage Lending Is a Great Way To Get Ahead
Leveraged lending is about borrowing to invest. It’s about growing wealth at an accelerated pace.
By doing so clients also have access to:
• capital growth acceleration potential;
• possible tax advantages
• the opportunity to build and diversify an investment portfolio.
Advantages of Leveraged Lending:
- Potential for Accelerated Capital Growth -provided by taking advantage of compounding investment income. The key is to ensure that the leveraged investments produce income mainly in the form of capital gains. *Note: that compared to interest income, capital gains income is taxed much more favourably.
- Possible Tax Advantages – A client’s interest payments may be tax deductible if the client borrows to invest in a non-registered investment. The key is the potential for an income to be generated from the investment and the direct relationship between the borrowed funds and the investment.
I called my investment and tax accountant Fabio Campanella, and here’s what he had to say:
“When borrowing to invest in a property that will more than likely generate income for the investor (such as a rental property) the interest on the borrowings should qualify for an immediate tax deduction. The income tax act does not specify that the borrowing need be secured against the asset purchased, only that the borrowed funds must be applied to the investment directly. This opens the opportunity for investors to borrow against personal assets such as their principal residence and still achieve interest deductibility on their loans.
Care must be taken to ensure that the borrowing and subsequent investment with borrowed funds is clearly traceable to ensure that the interest is in fact tax-deductible. It is best to engage a qualified accountant or tax lawyer prior to entering into a borrow-to-invest structure to confirm the deductibility of the interest as there are several well-documented cases where investors have been denied their deductions.”
FABIO CAMPANELLA, CA, CFP, CIM
CAMPANELLA MCDONALD LLP
The best way to start this tax efficient investment strategy is by pulling the equity out of your residential or rental properties in the form of a Home Owner Line of Credit. Click APPLY or call me to start taking action today!