Is interest on a mortgage applied to a vacant land tax deductible?

Gena Katz, a chartered accountant and principal with Ernst and Young, has the answer.

Gena Katz 5 June, 2003 | 1:00PM
Dear Expert:

I have a primary residence in Ontario and I own vacant land in British Columbia. I have a mortgage on both properties. Eventually, I may build a house on the vacant land, sell my Ontario residence and declare the B.C. location my primary residence. Is the mortgage interest that I am currently paying for the vacant land tax-deductible as investment income, and, if so, is it to my advantage to deduct this?

Expert Answer:

In order for interest to be deductible for tax purposes, it must relate to borrowed money used to purchase property acquired to earn income from business or property. A capital gain is not considered income from property. So unless you are currently renting out the vacant land, the current mortgage interest is not deductible.

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Gena Katz

Gena Katz