§ 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.