What Investment Fees Can You Claim on Your Tax Return?
Do you pay fees for financial advice and portfolio management? You can reduce your taxable income by claiming certain investment expenses on your tax return.
Related: Preparing for Tax Season
You can claim some direct costs related to your investing, as well as interest on investment loans on Line 22100 (carrying charges and interest expenses) of your income tax return.
Claim these direct costs
If you use an investment advisor to buy and sell investments in your non-registered accounts, you can claim the fees you pay for that specific investment advice.
You can also claim any fees paid for the management of your account, including custody of your assets, account record keeping and administration costs.
If you use an accountant or tax specialist to help you with your tax filing, some fees may be deductible – but only if they relate directly to your investment earnings.
Interest on investment loans
If you borrow money to invest, you can claim the loan interest if you used the money to buy income-earning investments. Those investments should be paying interest, dividends, rent, or royalty income. You can’t claim if the earnings just come from capital gains.
Sometimes, if a shareholder has a reasonable expectation of receiving dividends sometime in the future, the interest expense will be allowed.
The interest must have been paid during the taxation year. Investment loans could be from a mortgage, loan, line of credit, or margin account held at your brokerage.
These investment expenses are not deductible
- Fees for general financial planning or counseling services. If you use a fee-only financial planner, you’re out of luck.
- Mutual fund and ETF fees (MERs) are not paid directly by the investor. Rather, they are deducted from the income reported on your tax slip.
- Penalties for early redemptions of funds.
- Brokerage fees (commissions) for buying or selling investments in your non-registered account. Instead, you can use these costs when calculating your capital gains or losses when the investments are sold.
- Loan interest on money borrowed to buy investments in registered accounts such as RRSP, RESP, and TFSA.
- Investment management fees, annual administrative fees, commissions, and other fees charged in your registered portfolios.
- Subscription fees for financial newsletters, newspapers, or magazines.
The bottom line
Tax expert Evelyn Jacks states that one of the most common CRA red flags is an improper claim for investment expenses. Mainly the income tax deduction for financial or investment advice relates to management fees for non-registered accounts.
It always makes sense to ask your advisor which fees are deductible.
To deduct loan interest, you must be able to trace borrowed money directly to the income-producing investment you purchased.
Hold on to any proof of expenses paid, including receipts and statements.
Related: How Retirement Can Affect Your Taxes