CARRYING CHARGES & INTRESTS

Line 22100 allows a deduction for carrying charges, interest and certain other expenses paid to earn investment income from property in non-registered accounts.

DEDUCTIBLE AMOUNTS

• Interest on money borrowed to invest in assets that can reasonably be expected to produce income (interest, dividends or rent), such as shares or a rental property. The borrowed money must be traceable to the investment.

• Investment counsel and management fees for non-registered accounts, other than commissions on purchases and sales (those adjust cost or proceeds).

• Accounting fees for recording investment income.

• Interest on a loan used to buy bonds or similar interest-bearing investments.

NOT DEDUCTIBLE

• Safety deposit box fees (no longer deductible since 2014).

• Fees paid to have someone prepare a return, unless the taxpayer has business or property income that requires professional accounting.

• Interest on money borrowed to contribute to an RRSP, RRIF, TFSA, FHSA or RESP.

• Fees for registered accounts.

• Interest on borrowing for personal purposes (a car, vacation or home), unless the borrowing is used to earn income.

• Interest on money borrowed to buy investments that produce only capital gains with no reasonable expectation of income, such as land held for appreciation (the interest is added to cost instead).

TRACING AND THE SMITH MANOEUVRE

Deductibility depends on the current use of borrowed money. Some homeowners convert non-deductible mortgage debt into deductible investment debt by using a readvanceable mortgage to invest; this is legal when properly traced but adds investment risk and record-keeping.