By Sean Cooper
If you earned investment income last year, the CRA may let you claim carrying charges and interest charges on your tax return to lower your tax bill. You won’t receive a tax slip for these charges, so you’ll have to calculate and claim them yourself. Carrying charges and interest charges are claimed on Line 221 of your tax return.
The Canada Revenue Agency lets you claim carrying charges and interest charges incurred, while you earn income from investments. You’re only able to claim this tax deduction for certain types of investments that pay dividends or interest; you’re not able to claim interest charges for investments like exchange traded funds, mutual funds and stocks that only result in capital gains.
Charges You Can Claim
The CRA lets you claim carrying charges and interest charges that meet the above requirements. Here’s a list of charges the CRA lets you claim, while earning investment income:
- You can claim investment fees and fees for looking after your investments, besides any management fees paid for your Registered Retirement Savings Plan or Registered Retirement Income Fund.
- You may be able to claim fees paid for investment advice or towards investment record keeping.
- You may be able to claim fees paid to an accountant to complete and file your tax return, but you must claim business or property income; use accounting as a daily part of your business; and not claiming a tax deduction for this same expense against your business or property income.
- You can claim any interest paid in the year for a policy loan used while earning income. To claim this amount, make sure your insurance provider completes and files Form T2210, Verification of Policy Loan Interest by the Insurer, before the April 30 tax filing deadline, otherwise your claim will be disallowed.
- You can claim any legal fees paid for support payments that your current or ex-spouse will have to pay to you.
Charges You Can’t Claim
There are certain carrying charges and interest charges the CRA doesn’t let you claim on your tax return. Here’s a list of charges that most likely will be disallowed:
- Any income you paid on borrowed money for contributing to a RRSP, pooled registered pension plan, a specific pension plan, registered education savings plan, registered disability savings plan or tax-free savings account.
- Any charges paid to your bank, credit union or financial institution for a safety deposit box.
- Any interest you paid on your student loan while attending college or university; you should instead claim these amounts on federal and provincial Schedule 1.
- Any subscription fees you paid towards financial newspapers, magazines or newsletters.
- Any commissions and brokerage fees you paid when buying or selling investments; such investment expenses may still be claimed when you sell and claim a capital gain or loss.
- Any legal fees you paid to a lawyer towards a divorce or separation agreement. You also can’t claim legal fees for obtaining custody or rights to see your child.
About the Author
Sean Cooper is a financial journalist and personal finance expert. His areas of expertise include real estate, mortgages, pensions and retirement. His articles have been featured in major publications, including the Toronto Star, the Globe and Mail, MoneySense and RateSupermarket.ca.