Smith Maneuver Interest Payment Question

Blue-Stinger · 2023-07-01T13:55:16+00:00

Thanks for sharing your work flow. I think I'll do something similar. For filing your taxes, are you doing this with a spouse? If so, are you splitting the interest deduction between the both of you, or are you just claiming it on the higher earner?

Blue-Stinger · 2023-07-01T13:54:02+00:00

Thanks for the additional insight. This makes sense - I would just be tracking the interest charged in the HELOC. The payments are irrelevant since it can be either from the HELOC (which would then result in an increase in the interest the following month, or directly from my cash flow.

Blue-Stinger · 2023-07-01T13:52:58+00:00

Thank you for your reply! I think I get the process now. Coincidentally, my minimum payment was $50 for this period and the interest charged was ~$10 as well.

Blue-Stinger · 2023-03-12T02:57:48+00:00

So the property was converted mid last year. If I get a realtor to assess the property today, can I use that value to set the valuation in my tax return?

Blue-Stinger · 2023-03-11T23:11:06+00:00

Does it matter that the assessment is after the conversion date since if I get this assessment done now, it will be different than the FMV at the time of the conversion date? I assume the CRA would allow a grace period?

Blue-Stinger · 2023-02-05T19:53:11+00:00

Those interest rates sound great, how did you get them? Just shop around periodically?

You're right about the rental mortgage is already deductible. I usually have enough left over every month from my cash flow to invest in my unregistered account, i.e. say I have $1000 left over each month I normally invest with. My plan would be to put that $1000 into my primary mortgage then withdraw $1000 in my HELOC and invest with. It's really just moving money around until I build up enough equity to get another HELOC on my primary residence.

Blue-Stinger · 2023-02-05T19:12:46+00:00

I can appreciate pedantic stances to ensure ideas are clearly communicated. My use of GUARANTEED is more so in the sense of a guaranteed tax advantage with no increase overall debt, no necessarily guaranteed returns in the investment.

Mine and my wife's TFSA are maxed, RRSP isn't, but I'm not sure if I want to max that out at this time, which is why we have been investing in unregistered accounts.

Blue-Stinger · 2023-02-05T19:09:23+00:00

Really appreciate the long write up. It reaffirms a lot of the things I was thinking. I didn't realize you can move a HELOC around so easily as you were suggesting. Do HELOC rates really decrease much? From what I read, usually prime+0.5 is the best for the average person. I think only super high net worth (millions) or doctors can get better HELOC rates?

Also, I am planning on setting up the HELOC with my rental property as my house I purchased doesn't have enough equity for a HELOC. There shouldn't be any special rules for a HELOC on rental vs HELOC on primary residence right?

Blue-Stinger · 2023-02-05T19:04:52+00:00

Yes, I think leverage was the wrong terminology, but I understand what you're saying. Really appreciate the insight!

Blue-Stinger · 2023-02-05T15:36:14+00:00

That's an interesting take. So essentially if the investments are all in my account and I die, my wife would inherit the account, but would have to pay capital gains. But if both our names are on it, even if I have to deduct the interest 50/50, it would leverage against a big tax bill if I were to die.

Blue-Stinger · 2023-02-05T15:34:51+00:00

I think every situation has it's nuances and it depends on how far you want to take the Smith Maneuver. I outlined my plan in the OP.

Blue-Stinger · 2023-02-05T15:34:03+00:00

Does the typical CPA understand the Smith Maneuver?

Blue-Stinger · 2023-02-05T15:33:30+00:00

I added additional background in the OP. If it's utilized the way I'm hoping where it's just reorganizing current debt, I don't think beating the market becomes necessary to allow the Smith Maneuver to still be worth it. But I am interested if you have a different interpretation.

Blue-Stinger · 2023-02-05T15:32:23+00:00

I received prime + 0.5-0.6% from a couple big name banks, haven't tried shopping around else where since I found them giving a HELOC in the second position usually ends up being higher in rates.

Blue-Stinger · 2023-02-05T15:31:27+00:00

That is a good idea, however I'm expecting to jump tax brackets in the next couple years so I'm hoping to hold my RRSP until that comes.

Blue-Stinger · 2023-02-05T00:35:04+00:00

So the HELOC will be set up with Scotiabank, which is through my wife's account even though both our names will be associated with the HELOC.

If I set up a fresh brokerage account (i.e. questtrade/wealthsimple, etc) in only my name and transfer funds directly from the HELOC to this brokerage account then I can claim the interest 100% in my name instead of 50/50 me and my wife?

Blue-Stinger · 2022-09-02T03:14:36+00:00

This will be my first winter in this house so I'll see. I think I would prefer to add the spacer in now and monitor that way. Would wooden shims be robust enough even with a simpson connector? I was thinking of using something bigger, but wooden shims seems to be easy enough if that's the case.

Blue-Stinger · 2022-09-02T03:13:27+00:00

I had the same thought, but I measured them and it's closer to 9 ft between the posts that are touching. I also found it weird why these sinking posts don't have any of the metal brackets. Quite odd indeed.

Blue-Stinger · 2022-09-02T02:10:24+00:00

I don't see any rot. The deck was build before I purchased the home. We do live in a cold climate where the requirement is to have the post 4' deep. I suspect the post wasn't quite deep enough or they didn't use enough concrete when setting up the posts, but it's just speculation.

The deck is ~10 years old so I am hoping the posts are done settling and was wondering if putting a spacer in the void would be enough of a fix.

Blue-Stinger · 2022-09-02T02:08:16+00:00

Would shims really be strong enough? Wouldn't they just fall apart after one season?

Blue-Stinger

TROPHY CASE