What you pay to earn investment income can often be deducted from that income. Line 22100 — Carrying charges, interest expenses, and other expenses — is where those costs go.
What you can claim
Claim the following carrying charges and interest that you paid to earn income from investments:
- Fees to manage or take care of your investments. Not, however, fees you paid for services in connection with your pooled registered pension plan (PRPP), registered retirement income fund (RRIF), registered retirement savings plan (RRSP), specified pension plan (SPP), tax-free savings account (TFSA), or first home savings account (FHSA).
- Fees for certain investment advice, or for recording investment income.
- Reasonable fees to have someone prepare or assist you in filing your return, if you have income from a business or property, and if they have not already been deducted elsewhere.
- Most interest you paid on money you borrowed and used to try to earn investment income, such as interest and dividends.
- Legal fees you incurred relating to support payments that your current or former spouse or common-law partner, or the natural parent of your child, paid or will have to pay to you.
If the CRA paid interest on your income tax refund and later reassessed your return so that you repaid some of that refund interest, you can claim a deduction on line 22100 for the amount you repaid, up to the amount you had reported as income.
The test that decides interest
Interest is deductible only if the borrowed money could earn income such as interest or dividends. If the only earnings your investment can produce are capital gains, you cannot claim the interest you paid.
So it is what the investment is capable of producing, not what it actually produced in the year, that settles it.
What does not belong here
You cannot deduct any of the following on line 22100:
- Interest on money borrowed to contribute to a registered plan — an RRSP, a deferred profit-sharing plan (DPSP), a PRPP, a registered pension plan (RPP), a retirement compensation arrangement (RCA), a net income stabilization account, an SPP, a registered education savings plan (RESP), a registered disability savings plan (RDSP), a TFSA, or an FHSA. This cannot be claimed at all.
- Safety deposit box charges. These cannot be claimed at all.
- Interest on your student loans. Not here — you may be able to claim a credit for it on line 31900.
- Subscription fees for financial newspapers, magazines, or newsletters. These cannot be claimed at all.
- Brokerage fees or commissions you paid when you bought or sold securities. Instead, use these costs when you calculate your capital gain or capital loss.
- Legal fees to separate or divorce, or to establish custody of or visitation arrangements for a child. These cannot be claimed at all.
One more boundary, because the two sit close together: legal fees you incurred to try to make child support payments non-taxable must be deducted on line 23200 of your return, not on this line.
Interest on a life-insurance policy loan
To claim interest paid during the year on a policy loan made to earn income, ask your insurer to complete Form T2210, Verification of Policy Loan Interest by the Insurer.
The insurer fills it out, not you. It is worth requesting early, since the claim depends on it.
What your documents must show
The CRA's page for this line does not set out the fields a document has to carry. It asks you to keep all your documents. What the claim turns on is the amount of the fee or interest paid, and enough description to show what the payment was for — because the same statement can carry a management fee that qualifies and an account charge that does not.
If you have carrying charges for both Canadian and foreign investment income, complete the chart for line 22100 using your Federal Worksheet.
What to keep
Keep the annual fee statements and invoices from whoever manages or advises on your investments, your statements for interest paid on money you borrowed, an invoice showing what a return-preparation fee covered, and any account of legal fees relating to support payments owed to you. Keep Form T2210 if you have a policy loan.
Keep all your documents in case the CRA asks to see them later.
Dossier tags an investment fee statement when it arrives and files it under the tax year, so the year's charges are gathered rather than reconstructed from memory.
Official CRA sources
Source: Canada Revenue Agency (canada.ca). Not tax advice.