Taxation Of Loan Interest

Loan interest is tax deductible when the loan proceeds are used to earn taxable income, e.g., from

  • business investments
  • assets earning interest (e.g., bonds)

There needs to be a reasonable expectation of profit. So borrowing at 10% to earn a guaranteed 4% in GICs would not qualify.

There is no deduction for loans for

  • registered plans (RRSPs, RESPs)
  • insurance premiums

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