While the creator of the eponymous Smith Manoeuvre, Fraser Smith, is sadly no longer with us, the tax-savings movement he spawned is very much alive and well in Canada.
Born in 1938, Smith died of cancer on September 25th at age 73.
His “manoeuvre” was and is a way for Canadians to achieve what American homeowners enjoy as a matter of course: writing off interest on their mortgages. In Canada, you can’t directly deduct mortgage interest cost on a principal residence from your taxes.
Smith developed a perfectly legal end run that let homeowners convert the bad debt of non-deductible mortgage interest into the good debt of tax-deductible investment loans. The manoeuvre combined the traditional step of paying down mortgage principal with re-borrowing monthly principal payments for the purpose of investing in stocks or other securities. Interest on the latter can be written off for tax purposes.
Click here to read more from the Financial Post
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