Investment loan interest, safety deposit box fees, investment counsel fees — Schedule 4 deductions that reduce your taxable income from investments.
Carrying charges are expenses you incur to earn investment income. Unlike employment expenses (which require a T2200) or business expenses (which require self-employment), carrying charges can be deducted by any investor who paid eligible costs to generate income from property, interest, dividends, or rents. These deductions are claimed on Schedule 4 (Statement of Investment Income) and flow to Line 22100 of your T1 return.
The CRA defines carrying charges as amounts paid to earn income from a business or property. For most individual investors, this means expenses related to earning investment income — interest, dividends, and rental income. The key test is a direct connection between the expense and the income-earning purpose.
Interest paid on money borrowed to earn income from investments is fully deductible. This is the largest and most valuable carrying charge for leveraged investors. To qualify:
If you borrowed to invest in a TFSA or RRSP, the interest is NOT deductible (sheltered accounts break the direct connection between the loan and taxable income).
Fees paid to a portfolio manager, investment advisor, or financial planner for advice on buying or selling specific securities are deductible. This includes:
NOT deductible: Mutual fund management expense ratios (MERs) — these are deducted at the fund level before you receive your return, so you never "pay" them directly. Also not deductible: fees charged inside a TFSA or RRSP (no connection to taxable income).
Annual fees for a bank safety deposit box are deductible if you use the box to store share certificates, bond certificates, or other investment documents. If the box is used partly for personal items and partly for investment documents, only the investment-related portion is deductible. With the shift to electronic/book-entry securities, this deduction is increasingly rare but still valid.
Fees paid to an accountant specifically for preparing your investment income records (Schedule 4, tracking ACB of securities) are deductible as a carrying charge. General tax preparation fees are NOT deductible as carrying charges (though they were until 2017 when the deduction was eliminated).
Legal or administrative fees paid specifically to collect interest or dividends owing to you (for example, pursuing a defaulted bond issuer for owed interest) may be deductible as a carrying charge.
The CRA traces borrowed funds to their use. If you borrow $50,000 and invest $30,000 in dividend stocks and $20,000 in a TFSA, only the interest on $30,000 is deductible. You must maintain clear documentation of how borrowed funds were deployed. Commingling borrowed and personal funds can make it difficult to trace and may result in partial deductibility being disallowed.
Prescribed rate loans are a tax planning strategy where a higher-income spouse lends money to a lower-income spouse at the CRA's prescribed interest rate (currently 5% in 2026, set quarterly). The interest payments on the loan are deductible by the borrowing spouse only if they are actually paid by January 30 of the following year. This strategy allows investment income to be taxed in the lower-income spouse's hands rather than attributed back under the attribution rules.
Carrying charges are reported on Schedule 4 (Statement of Investment Income). In Schedule 4, there is a section specifically for "Carrying charges and interest expenses." List each type of charge with the amount. The total from Schedule 4 flows to Line 22100 of your T1. Keep all receipts, annual statements from advisors, and loan interest confirmation letters from your bank for at least 6 years.
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