The Fund Library :: Special Reports :: Which investment fees are deductible?

Q – With year-end rapidly approaching, I’ve been going through my financial statements and slips to see what kind of investment or investment-related expenses I’ve paid through the year, and which ones might be deductible on my personal tax return. I’ve heard that subscriptions to financial publications might be deductible, as well as safe-deposit box fees. Is that true? Could you provide a summary? – Harry M., Toronto, Ontario

A – Some fees and expenses related to investing are deductible on Line 221 (“Carrying Charges and Interest Expenses”) of your personal tax return, but the list is a relatively short one. The list of fees that many mistakenly believe are deductible – but in fact are not deductible – is much longer. Here’s a recap:

The guiding rule to remember is that the investment expense may be deductible if it was incurred to earn income from your investments. That limits the list rather drastically, and the Canada Revenue Agency has pretty much sealed the door on any items above and beyond what falls under the category of investment management and investment counsel.

Basically fees, other than commissions, paid to someone to manage and/or give you counsel on your non-registered investments may be deductible. This includes fees paid for advice on buying or selling a specific share or security or for the administration or the management of the shares or securities. Note that the fees must be paid to someone whose principal business is advising others whether to buy or sell specific shares and/or including the administration or management of shares or securities.

If you have business or property income, if you routinely keep books for the business, and if you haven’t already claimed the expense against your business income, the CRA allows you to deduct fees you paid to have someone else complete your tax return.

You can also claim interest on money borrowed for the purpose of earning investment income, which generally means dividend or interest income. Interest on money used for investments that produce only capital gains is not deductible. So if you’re planning to borrow for investment purposes, make sure there is at least some income component to the investment. Always check with your financial advisor about the suitability of any investment – and never invest solely for a tax benefit.

As for the list of expenses that you cannot claim, it’s basically everything else, which makes it a pretty long list.

Fees for general financial planning are not deductible, nor are brokerage fees or commissions incurred in trading securities. And you may not deduct administration fees paid for, or interest on loans made to contribute to, registered plans such as a Registered Retirement Savings Plans (RRSP), Tax-Free Savings Account (TFSA), Registered Disability Savings Plan (DSP), Registered Pension Plans (RPP), and Registered Education Savings Plans (RESP). Again, check with your advisor to make sure you don’t run afoul of the rules governing what you cannot do.

Are fees paid for safety deposit boxes deductible on Line 221, even if used to store certificates or investments (e.g., gold)? No. Up until March 2013, they used to be, but no longer. In addition, subscription fees for investment newsletters, newspapers, magazines, or other types of paid investment advisories are not deductible here.

You can see the list of deductible investment expenses is a fairly short one, while the list of exclusions is long. So make sure you get a statement from your advisor or money manager detailing annual investment counsel and management fees. And remember, this applies to making deductions on Line 221 of your personal tax return. If your primary business is investing, you may be able to deduct many more items as business expenses. However, that’s a whole different story, which can also be a whole lot more complicated, so again, consult with your financial advisors. – Robyn

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 rthompson@castlemarkwealth.com for a confidential planning consultation.

Notes and Disclaimer

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.