Cash dammingCRA folio S3-F6-C1

Make part of your mortgage tax-deductible.

If you own a rental and carry a mortgage on your home, there is a CRA-recognized way to gradually turn your non-deductible mortgage interest into deductible interest. At the top Ontario rate, every dollar you make deductible is worth more than 53 cents back.

01

Rent pays your home down

Your rental income goes straight onto your non-deductible home mortgage, so it shrinks years faster.

02

A dedicated line covers the rental

You pay the rental’s expenses from a separate line of credit instead of out of pocket.

03

That interest turns deductible

Money borrowed to earn rental income is deductible. Your debt quietly shifts to the tax-favoured side.

See it on your numbers

Your numbers

See what it could be worth for you.

Three numbers drive the result: how big your home mortgage is, how much rent you collect, and your tax bracket. Set those and the estimate updates live.

Home mortgage

The balance you want to convert

Rental income / yr

Gross rent you collect

Your tax bracket

Higher bracket, bigger benefit

Estimated over 15 years

$72,561back in tax

14.2 yrs

Mortgage paid off sooner

$216,667

Deductible debt built by year 15

The benefit builds over time: it starts small and compounds as more of your debt moves to the deductible side. Assumes your rent is redirected to your home mortgage while a dedicated line covers the rental costs, a 25-year amortization, prepayments within your privilege, and steady execution. Illustrative only. Your accountant confirms deductibility for your facts.

Get your plan

Have the Physician Financing team run your numbers.

Tell us how to reach you and a few quick things about your setup. We use the numbers above, confirm the strategy actually applies to you, and walk you through the plan. No charge to find out.

Common questions

What is cash damming?

A CRA-recognized cash-flow strategy. You apply your rental income to your non-deductible home mortgage, and pay your rental expenses from a dedicated line of credit. Because that borrowed money earns rental income, its interest becomes tax-deductible. Over time your debt shifts from the non-deductible side to the deductible side.

Is cash damming legal in Canada?

Yes. The Canada Revenue Agency describes it by name in Income Tax Folio S3-F6-C1 and confirmed it in a technical interpretation. It works when the borrowed money genuinely earns income and the funds are kept cleanly traceable. Your accountant confirms deductibility for your specific facts.

Do I need a rental property?

Yes. Cash damming requires rental income (or an unincorporated business). You also need a mortgage on your own home to convert, and a readvanceable mortgage or line of credit.

Does this make me money right away?

It builds over time. The deductible balance grows each year, so the tax benefit starts small and compounds, while your rental income pays your home mortgage down years early. It is a long strategy, not an instant refund.

This page is mortgage structuring and education, not tax, legal, or accounting advice. Whether interest is deductible depends on your specific facts and is determined by your accountant and the Canada Revenue Agency. The strategy is described in CRA Income Tax Folio S3-F6-C1 and rests on Income Tax Act 20(1)(c). It only works when the borrowed money genuinely earns income, the funds are kept cleanly traceable in a dedicated account, and proper records are kept. All figures shown are illustrative examples and your results will differ. Confirm with a qualified accountant before acting, and involve a lawyer for any title, ownership, or security matter.