Subject: Inquiry About Deductions for Mortgage Prepayment Fees in Canada
Hello everyone,
I’m reaching out for some guidance. I’m wondering if there are any accountants in Canada who can assist me in figuring out whether I can deduct the fees charged by my bank for closing my mortgage early, as I recently sold my rental apartment.
Specifically, I’m curious if these fees can be included as a deduction on line 8710, or if they should be viewed more as a capital gain deduction that can be subtracted from the proceeds of disposition.
Thank you for your assistance!
One response
Hello!
When it comes to advanced repayment fees (also known as prepayment penalties) on your mortgage, the tax treatment can be a bit nuanced. Generally, in Canada, if you incur these fees as a result of selling a property, they are typically considered a cost associated with the disposition of that property.
You cannot claim these fees directly as a deduction on line 8710 (which is related to expenses related to income properties). Instead, you might be able to add these fees to the adjusted cost base (ACB) of your property. This means they can reduce your capital gain when you calculate the profit from the sale of your rental apartment.
However, it’s essential to keep in mind that tax laws can change, and there may be specific circumstances that apply to your situation. I strongly recommend consulting with a tax professional or an accountant who specializes in real estate in Canada. They will be able to provide personalized advice based on your specific case.
Hope this helps, and good luck with your property sale!