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Returning Member
posted Feb 28, 2022 8:13:14 AM

Mortgage Prepayment Penalty - Principal Residence

Hello Community

 

In 2021, I sold an Investment Property. 

 

The Proceeds from that sale, I used to pay off the Mortgage on my principal residence (the house I'm living in)

 

There was a Prepayment penalty which I had to pay to close the mortgage on the principal residence. 

 

Can the penalty be used as a tax credit somehow and, if so, where do I enter it?

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1 Replies
Level 4
Apr 24, 2022 10:52:28 AM

According to the Canada Revenue Agency (CRA), there are certain conditions required for the prepayment penalty to be tax deductible. For the deduction to be allowed, the prepayment penalty must be paid on money that you've borrowed in the course of earning income from property. In this case, you are repaying a debt obligation that is associated with your principal residence, and therefore is not tax deductible. You are not using that specific property for earning income.

For more information, check out: Tax Treatment of Prepayment Penalties

 

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