Key Takeaways
Fees paid to stockbrokers, general financial counselling and planning, and commissions are not classified as eligible investment expenses.
Legal and accounting fees such as making annual corporate filings or routine audits of financial statements can be claimed as an expense if they were incurred during normal course of business.
If the only earnings your investment can produce are capital gains, you cannot claim the interest you paid as an investment expense.
Fees to manage and safeguard the investments (other than fees you paid for services in connection with your pooled registered pension plan (PRPP), registered retirement income fund (RRIF), registered retirement savings plan (RRSP), specified pension plan (SPP) and tax-free savings account (TFSA)).
Fees paid to an investment counsel must be paid to a person whose principal business is advising others whether to buy or sell specific shares or whose principal business includes the administration or management of shares or securities, provided the amounts are reasonable. To determine the reasonability of the fees, the Canada Revenue Agency (CRA) will take into consideration the type of work performed and the amount of time that was spent. Fees for general financial counselling and planning are not deductible. The following services normally qualify:
The right to buy and sell securities on behalf of the client based on their own judgement without reference to those clients
Custody of securities
Collection and remittance of income
Maintenance of accounting records
Legal and accounting fees are generally deductible when they relate to normal business activities, transactions, or necessary contracts for earning income from a business or property. Some of these services are:/li>
Issuing bonds, debentures or mortgages,
Preparing contracts in relation to the sale of inventory,
Making annual corporate filings,
Routine or regular audits of financial statements,
Conducting appeals in respect of, for example, sales tax including Goods and Services Tax/Harmonized Sales Tax, excise, municipal, or property taxes, and
watching legislation (including customs and other regulations) affecting the business operations of the taxpayer.
The interest paid on the borrowed funds for investment purposes is deductible if it is intended for the sole purpose of earning investment income such as interest or dividend income. If the only earnings your investment can produce are capital gains, you cannot claim the interest you paid. If you’re paying interest on borrowed funds used to generate business income, you can deduct those interest expenses on Line 8760 of your T2125 (Statement of Business and Professional Activities).
Interest you paid on money that you borrowed to contribute to an RRSP, a deferred profit-sharing plan (DPSP), a PRPP, a registered pension plan (RPP), a retirement compensation arrangement (RCA), a net income stabilization account, an SPP, a registered education savings plan (RESP), a registered disability savings plan (RDSP), or TFSA
Safety deposit box charges
Subscription fees paid for financial newspapers, magazines or newsletters
Brokerage fees or commissions you paid when you bought or sold securities. Instead, use these costs when you calculate your capital gain or capital loss
Canadian taxpayers can claim certain expenses related to their investments such as investment management fees and interest charges as deductions on their tax return. These expenses fall under Line 22100 and includes carrying charges, interest expenses, and other relevant costs. If you’ve incurred fees for managing investments, received investment advice, or paid interest on borrowed money used for investment purposes, you may be eligible for these deductions.
Fees and expenses that can be claimed fall into the following categories:
The following can not be claimed as an investment expense on Line 22100 (source: Canada.ca):
For further information please contact Taxtron Support at 416-491-0333 or visit www.taxtron.ca
Posted on 07 July 2024