231 – Carrying charges and interest expenses

If you are deducting carrying charges and interest expenses incurred to earn investment income, you may be required to adjust your investment expenses. See the instructions for line 260 and complete Schedule N.

Carrying charges

The expenses you can deduct include:

  • investment management or administration fees, such as fees you paid with respect to shares included in a Stock Savings Plan II (SSP II), except fees paid with respect to a registered retirement savings plan (RRSP), a pooled registered pension plan (PRPP) (including a voluntary retirement savings plan [VRSP]), a registered retirement income fund (RRIF) or a tax-free savings account (TFSA);
  • amounts paid for the safekeeping of your shares and securities;
  • fees, other than commissions, paid to certain investment counsellors, except fees paid with respect to an RRSP, a PRPP/VRSP, a RRIF or a TFSA; and
  • the amount shown in box L-4 of your RL-1 slip.

Interest expenses

You can deduct the interest paid on loans you took out in order to earn investment income if the loans were used to purchase, for example:

  • bonds, in which case the interest you can deduct includes interest paid through payroll deductions;
  • shares, including shares included in an SSP II, up to the time the shares were transferred to an RRSP or a TFSA;
  • preferred shares in a cooperative authorized to issue securities that qualify for the Cooperative Investment Plan (CIP), up to the time the shares were transferred to an RRSP or a TFSA;
  • an interest in a partnership of which you were a specified member; or
  • mutual fund units, up to the time the units were transferred to an RRSP or a TFSA.

Subject to certain rules, you can also deduct all or part of the interest paid, after the sale of investments, on loans you took out in order to purchase the investments. To determine the deduction you can claim, contact us.

Life insurance policy loan

You can deduct the interest you paid on a loan taken out on a life insurance policy in order to purchase an investment from which you derived income. Have your insurer complete form TP-163.1-V, Interest Paid on a Loan Taken Out on a Life Insurance Policy. Enclose the form with your return.

Non-deductible expenses

The following expenses are not deductible:

  • the rental charge for a safety deposit box;
  • commissions paid to a broker on the purchase or sale of shares or mutual fund units (commissions paid on the purchase of securities are included in the cost of the securities, whereas commissions paid on the sale of securities must be reported as expenses in Schedule G);
  • interest paid on loans taken out in order to make contributions to a registered pension plan (RPP), a deferred profit-sharing plan (DPSP), a registered retirement savings plan (RRSP), a pooled registered pension plan (PRPP) (including a voluntary retirement savings plan [VRSP]), a registered education savings plan (RESP), a registered disability savings plan (RDSP) or a tax-free savings account (TFSA);
  • interest paid on loans taken out in order to purchase Capital régional et coopératif Desjardins shares, shares in the Fonds de solidarité des travailleurs du Québec (FTQ), or shares in Fondaction, le Fonds de développement de la Confédération des syndicats nationaux pour la coopération et l'emploi;
  • interest paid on loans taken out in order to purchase property that was transferred to an RPP, an RRSP, an RDSP or a TFSA (the interest is non-deductible as of the date of the transfer);
  • interest paid on loans taken out in order to repay amounts withdrawn from an RRSP under the Home Buyers' Plan (HBP) or the Lifelong Learning Plan (LLP);
  • management and administration fees, as well as fees paid to investment counsellors, if the fees were paid with respect to an RRSP, a PRPP/VSRP, a RRIF or a TFSA;
  • administration fees incurred for the purchase of Capital régional et coopératif Desjardins shares, shares in the Fonds de solidarité des travailleurs du Québec (FTQ), or shares in Fondaction, le Fonds de développement de la Confédération des syndicats nationaux pour la coopération et l'emploi; and
  • the cost of purchasing specialized publications and journals.

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