# Deducting interest on investment loans > When interest on money you borrow to invest is deductible, why how you use the money matters more than the loan itself, and Quebec's extra limit. - Web page: https://taxnotes.ca/guides/interest-on-investment-loans/ - For: Individuals & families · Topic: Saving and investing - Last reviewed: 2026-10-10 You can generally deduct the interest on money you borrow to invest, as long as the investment can reasonably be expected to pay you income such as interest or dividends. What matters is what you used the borrowed money for, not what you put up as security for the loan. ## The basic rule You can claim interest as a carrying charge (line 22100) when: - **You borrowed money and have a legal obligation to pay interest on it**, and you paid it in the year (or it's payable for the year). - **The rate is reasonable.** A rate set between an arm's-length lender and borrower is generally reasonable. - **You used the money to earn income from investments** (or a business), with a reasonable expectation of income when you made the investment. "Income" here means amounts like interest and dividends. Hoping for a capital gain isn't enough: if the only thing an investment can earn is a capital gain, you can't deduct the interest. The income doesn't have to be larger than the interest, though. Federally, the deduction isn't limited to what the investment pays you. **Common shares and mutual funds.** The CRA generally allows interest on money borrowed to buy common shares, because when you buy them there's a reasonable expectation of dividends. That changes if the company has said it doesn't pay dividends and doesn't expect to, so that you'd have to sell to get any value. The same thinking generally applies to mutual funds. The deduction lowers your taxable income, so it saves tax at your marginal rate; see the [income tax brackets](https://taxnotes.ca/rates/income-tax-brackets/). ## It's the use that counts The test is the direct, current use of the borrowed money, and it's up to you to trace each borrowed dollar to an eligible use. - **Security doesn't decide it.** A loan secured by your home is deductible if the money went into income-earning investments. A loan secured by your investments isn't if the money paid for a car. - **Keep borrowed money separate.** Putting borrowed money in its own account, apart from your savings, makes it much easier to show where it went. - **You can restructure.** You may sell investments you own, use the cash to pay down a personal loan such as a mortgage, then borrow to buy investments. The new loan's direct use is investing. - **Switching investments.** If you sell an investment and put all the proceeds into another income-earning investment, the interest stays deductible. If you take money out for personal use, interest on that part stops being deductible. - **Refinancing.** Money borrowed to repay an earlier loan is treated as used for the same purpose as the original loan. ## If the investment loses value If you sell an investment at a loss and use the proceeds to pay down the loan, the remaining balance no longer has an income-earning use. Special "disappearing source" rules can let you keep deducting the interest on it, if specific conditions are met. They don't apply to real estate or depreciable property. ## What you can't deduct - Interest on money borrowed to contribute to an RRSP, TFSA, FHSA, RESP, RDSP or registered pension plan. - Interest on money borrowed to buy property whose income would be tax-exempt, or to buy a life insurance policy. - Interest on student loans. You may be able to claim a credit for it instead. - Brokerage fees and commissions on buying or selling securities. These are used in working out your capital gain or loss instead. - Safety deposit box charges and subscriptions to financial newspapers, magazines or newsletters. Along with interest, you can claim fees to manage or take care of your investments and certain investment advice fees, but not fees related to an RRSP, RRIF, TFSA, FHSA or similar registered plan. ## In Quebec: a limit on investment expenses What you can deduct on your Quebec return (line 231) is much the same, but Quebec adds a limit: your investment expenses, including carrying charges and interest, can't be more than your investment income for the year. You work out the adjustment on Schedule N (line 260). The excess isn't lost: you can use it to reduce your net investment income for the three previous years or for future years. Quebec also stops the interest deduction on a loan used to buy shares or mutual fund units from the date you transfer them into an RRSP, TFSA or FHSA. ## What to do - Keep a record that traces each borrowed amount to the investments it bought, along with statements showing the interest you paid. - Use a separate loan or account for investment borrowing. - Claim the interest and eligible fees as carrying charges on your federal return; in Quebec, also check whether Schedule N limits your claim. - Keep all your documents in case the CRA asks to see them. ## Sources 1. [Line 22100 – Carrying charges, interest expenses and other expenses](https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-22100-carrying-charges-interest-expenses.html) (canada.ca) 2. [Income Tax Folio S3-F6-C1, Interest Deductibility](https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-3-property-investments-savings-plans/series-3-property-investments-savings-plan-folio-6-interest/income-tax-folio-s3-f6-c1-interest-deductibility.html) (canada.ca) 3. [Line 231 – Carrying charges and interest expenses (Revenu Québec)](https://www.revenuquebec.ca/en/citizens/income-tax-return/completing-your-income-tax-return/how-to-complete-your-income-tax-return/line-by-line-help/201-to-260-net-income/line-231/) (revenuquebec.ca) 4. [Line 260 – Adjustment of investment expenses (Revenu Québec)](https://www.revenuquebec.ca/en/citizens/income-tax-return/completing-your-income-tax-return/how-to-complete-your-income-tax-return/line-by-line-help/201-to-260-net-income/line-260/) (revenuquebec.ca) Tax figures in this guide come from the TaxNotes.ca rates tables (https://taxnotes.ca/rates/), which cite the Canada Revenue Agency and, for Quebec, Revenu Québec. Last reviewed: October 10, 2026 How to cite: "Deducting interest on investment loans", TaxNotes.ca, last reviewed 2026-10-10, https://taxnotes.ca/guides/interest-on-investment-loans/. For a figure or rule, also cite the official source listed above. Licence: CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/). Free to share and adapt with attribution: https://taxnotes.ca/reproducing-our-content/