How It Works

The Canadian Income Tax Act provides, in part, that where a person receives a loan because of the current or intended office or employment of an individual, the individual shall be deemed to have received a benefit in a taxation year equal to; a) all interest on all such loans computed at the prescribed rate, less, b) the amount of interest paid on all such loans. Generally this means that as long as the interest rate paid by the employee is greater than the Prescribed Rate of Interest, it can be received tax-free.

Mortgage Subsidies

The Subsidy is only available in respect of Mortgages arranged and funded exclusively through GEM Group Employee Mortgage Plan.

  • Employers can subsidize all or part of the interest portion of an Employee’s mortgage payment.
  • 100% of the interest portion is eligible for a mortgage subsidy, but only that amount that is above the “Prescribed Rate” is potentially “tax-free”.
  • A mortgage subsidy can be applied for as long as an Employer determines, however, the “Prescribed Rate” is reset every 5 years.
  • Subsidies cannot be attributable to the “principal” portion of the mortgage payment – that is automatically deemed as taxable income.

Mortgage Subsidy Defined

  • A Mortgage Interest Subsidy is potentially a tax-effective vehicle allowable through CRA and implemented as part of a company’s benefit program.
  • Employers can subsidize all or part of the interest portion on an Employee’s mortgage.
  • Tax-effectiveness is measured against the “Prescribed Rate” set by CRA.
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