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3. Currently in Canada the interest on a home mortgage is not deducted from your income when calculated income taxes. How would reversing this pol- icy affect the wealth of (1) current home owners, (ii) prospective home owners, and (ii) people in the construction business?

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Answer #1

Deduction of interest of home loans from the purview of income tax will have the following effect on various stakeholders:

1 Current home owners: People who are currently paying installments of home loan will now save more tax thus increasing their net disposable income.

2. Perspective home owners: More people will be attracted to buying home as they will be now purchasing capital as well as saving income tax as interest will now be not included in taxable income.

3. People in construction business: Due to tax saving policy demand of housing will increases. thus people in construction business and real estate will invest more in housing construction. Also increase in sales will increase their profits.

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