Claiming Your Investment Expenses
You can save on your taxes by claiming certain investment expenses which can reduce your taxable income.
You can claim some direct costs related to your investing as well as interest on investment loans.
Claiming Investment Expenses
Claim these direct costs
If you use an investment advisor to buy and sell investments, you can claim the fees you pay for that investment advice.
You can also claim any fees paid for the management of your account, including custody of your assets, account record keeping and administration costs.
If you use an accountant or tax specialist to help you with your tax filing, some fees may be deductible – but only if they relate directly to your investment earnings.
Interest on investment loans
If you borrow money to invest, you can make a claim if you used the money to buy income-earning investments. Those investments should be paying interest or dividends, but not solely capital gains.
Sometimes, if a shareholder has a reasonable expectation of receiving dividends at some time in the future, the interest expense will be allowed.
The interest must have been paid during the taxation year. Investment loans could be from a mortgage, loan, line of credit, or margin account held at your brokerage.
These investment expenses are not deductible
- Brokerage fees for buying or selling investments. Instead, you can use these costs when calculating your capital gains or losses.
- Fees for general financial planning services. If you use a fee-only financial planner you’re out of luck.
- Mutual fund fees are not paid directly by the investor. Rather, they are deducted from the income reported on your tax slip.
- The previous deduction for a safety deposit box has been eliminated.
- Loan interest on money borrowed to buy investments in registered accounts such as RRSP, RESP and TFSA.
- Financial newsletter, newspaper, and magazine subscriptions.
Final thoughts
Tax expert Evelyn Jacks states that one of the most common CRA red flags is an improper claim for investment expenses. It always makes sense to ask your advisor which fees are deductible.
You must be able to trace borrowed money directly to the income-producing investment you purchased.
Hold on to any proof of expenses paid, including receipts and statement.
The fees for a robo-advisor, like Wealthsimple, say they are deductible. Where do we put that deduction on the Tax forms? And how is that different from the “Brokerage fees for buying or selling investments. Instead, you can use these costs when calculating your capital gains or losses.” Thanks
@LJ Dumphy: The Robo-advisor fee for managing your non-registered account is deductible (not MERs). It goes on Line 221 – carrying charges and investment expenses.
Brokerage fees (or commissions) are the cost to buy or sell individual stocks or ETFs – usually ranging from about $5 – $10 for online brokerages. You add these costs to the original security price which reduces your capital gains calculation.
So if you have not traded, you cannot claim in the year. You just carry forward the higher ACB to a future year.
Yes, when you sell.
Here’s an example: You buy 100 shares of DEF at $10 a share. Your total cost is $1010 (cost of shares plus trading commission). The $10 is not a taxable investment expense. After a few years you sell all your shares at $15 and you pay another trading fee of $10. Your ACB is $1020. So, profit of $500 less $20 = $480/2, or $240 taxable capital gain.