Interest on funds borrowed for investment purposes

Interest on funds borrowed for investment purposes

The interest on the loan taken to purchase investments can be deductible if the investments generate income in the form of dividends or interest, or if there is a reasonable expectation that they will generate income. This deduction can be made from the total income.

Please note that the interest paid on funds borrowed for investment purposes is eligible for tax deduction in Canada as long as the investment or a replacement is owned. The deduction is no longer available once the investment is sold.

Record Keeping

Proof of use of borrowed funds for income-generating purposes is crucial for deducting interest.

You need to maintain documentation such as receipts or canceled checks to demonstrate that the loan was utilized for business operations or the purchase of bonds or shares.

For credit card debt, it is advisable to designate a single card for business expenses and use statements to claim all accumulated interest on that card.

Please download our free Excel template for the Mortgage/Loan Calculator that automatically computes your loan.

Canadian Mortgage/Loan Calculator - free Microsoft Excel template
This Excel Canadian mortgage calculator allows you to determine the payment and remaining balance for a mortgage based on various input parameters such as the term, additional unscheduled payments, compounding period, and payment frequency. In some cases interest may be tax-deductable (for example…

“Please note that the information provided in this article is of a general nature and may not be accurate for your specific situation. The information is current as of the date of posting and is not intended to provide legal advice. It's always recommended that you consult with a professional accountant and lawyer for personalized guidance and advice."