§ Calculator · Investment
Investment loan (leverage)
What this is
Borrow at X% to invest at Y%. Does the spread survive after-tax math?
Interest on a loan to earn investment income is tax-deductible in Canada (CRA s.20(1)(c)). That reduces the effective borrowing cost by your marginal rate. But the investment must produce income (dividends, interest), pure capital gain plays can disqualify the deduction.
- ·Net cost of borrowing = loan rate × (1 − marginal rate).
- ·Investment must earn at least the net cost to break even. Anything above is profit.
- ·Leverage amplifies BOTH the gains and the losses. Don't leverage what you can't afford to lose.
Monthly interest
$291
Net interest cost (after deduction)
$19,831
Investment FV
$100,483
Tax on cap gain
$10,919
After-tax value
$89,564
Net profit / loss
$19,733
Profit breakdown
The 'Smith Manoeuvre' uses this principle on a paid-down home: borrow against the home, invest, deduct the interest. Talk to a CFP before structuring it.
Disclaimer
Educational, not financial advice. Output is generated by an AI assistant using simplified assumptions. Tax rates, contribution limits, and benefit amounts change annually; confirm with a CFP, CPA, or the relevant Canadian regulator (CRA, FSRA, OSC, IIROC) before acting.