This is right at or near the top of the list for most investors. What about
the fee you pay your financial planner, your portfolio manager, the MER on
your mutual fund or ETF? You may deduct fees paid for certain investment
advice related to buying or selling a specific investment, or for recording
investment income. According to CRA Interpretation Bulletin IT238R2, “The
fees 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.”
What about financial planning or general financial advice? There’s a fine
line between what constitutes advice related to selling specific securities
and what doesn’t. In its Interpretation Bulletin IT-238, the CRA attempts
to make the distinction: It says fees paid for advice such as “general
financial counselling or planning” are not eligible, even fees paid to the
same advisor for advice on buying and selling investments are. However, it
doesn’t actually specify what “general financial counselling or planning”
is, but allows that fees paid for an advisor providing the following
services generally qualify: the custody of securities; the maintenance of
accounting records; the collection and remittance of income; and the right
to buy and sell on their own judgement on behalf of some clients without
reference to those clients (that is, discretionary portfolio management).
And what about your cable fee to get BNN Bloomberg, or subscription fees
paid for financial newspapers, magazines, or newsletters, either digital or
physical? Sorry, no dice. CRA says these expenses are not deductible.
Likewise, safety-deposit box charges are not deductible.
Here’s some good news. Fees you paid to professional investment managers to
manage and administer your investments are deductible. However, CRA will
not allow the deductibility of administration fees paid for your Registered
Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF)
or Tax-Free Savings Account.
CRA will also not let you deduct the management fees charged to a mutual
fund (that is, the management expense ratio). Because the MER is charged
directly against the fund, it is not reported on individual income tax
slips and so cannot be claimed as an investment management expense.
If you trade securities yourself through a broker, whether full service or
online discount, you may not deduct brokerage fees or commissions paid to
buy and sell securities. Instead, you may be able to use these costs when
you calculate your capital gain or capital loss.
Investors who pay fees directly for separately managed accounts (SMAs) or
wrap accounts may deduct those fees as carrying charges on their tax
Interest on money borrowed for investment purposes is deductible.
“Investment purposes” means you’re using the borrowed money to try to earn
investment income, including interest and dividends. However, generally you
may not deduct interest if you use borrowed funds only for the purpose of
generating a capital gain.
Interest on funds borrowed to contribute to an RRSP, a pooled RPP, a
specified pension plan, a Registered Education Savings Plan (RESP), a
Registered Disability Savings Plan (RDSP), or a Tax-Free Savings Account
(TFSA) is not deductible with one rather complicated exception. If you had
previously borrowed money to invest in a non-registered account and then
transfer the investment to an RRSP after you’ve repaid the loan in full,
you may still deduct the interest.
Deducting investment expenses and carrying charges can be a perilous
undertaking. If your situation is complicated and there are large amounts
involved, consult your financial advisor before making any claims on your
tax return. And always retain supporting documents, slips, and receipts to
back up your claim.
Robyn Thompson, CFP, CIM, FCSI, is the founder of
Castlemark Wealth Management, a boutique financial advisory firm specializing in wealth management
for high net worth individuals and families. Contact her directly by
phone at 416-828-7159, or by email at
for a confidential planning consultation.
Notes and Disclaimer
© 2019 by the Fund Library. All rights reserved. Reproduction in whole or
in part by any means without prior written permission is prohibited.
The foregoing is for general information purposes only and is the opinion
of the writer. Securities mentioned are illustrative only and carry risk of
loss. No guarantee of investment performance is made or implied. It is not
intended to provide specific personalized advice including, without
limitation, investment, financial, legal, accounting or tax advice. Please
contact the author to discuss your particular circumstances.