Can I deduct interest on money borrowed to invest?

Arsen Accounting Services · Question 167 · Sources checked October 29, 2026

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Interest deductibility generally depends on how borrowed money is used and whether the investment can earn qualifying income. The asset securing the loan is not the decisive factor. A loan against your home can finance either deductible or non-deductible uses.

Trace the money to its use

CRA permits many interest expenses on borrowed money used to try to earn investment income such as interest or dividends. It states that interest is not deductible when the investment can produce only capital gains. Borrowing to contribute to registered accounts has different restrictions.

Mixed-use borrowing makes the analysis harder. If a single credit line funds investments and personal purchases, keep a clear transaction history instead of claiming interest on the entire balance.

Official guidance: [1], [2].

Preserve the connection when investments change

For example, a borrower sells an investment and spends the proceeds personally while leaving the loan outstanding. The original purpose of the loan does not automatically establish ongoing deductibility. Review changes in use as well as the original purchase.

Gather the tracing records

• Loan agreement and interest statements.
• Transfers showing where borrowed funds went.
• Investment purchases, sales, and income expectations.
• Personal withdrawals and repayments from mixed accounts.

Ask for the interest claim to be reviewed before implementing a borrowing strategy. Keep investment risk and tax treatment separate: a possible deduction does not make a leveraged investment suitable or profitable. At year-end, reconcile the claimed interest to eligible use rather than relying only on the lender's annual total.