Deductible Interest Tracker

Getting Started with Deductible Interest Tracker

When you borrow money to invest, the interest you pay may be tax-deductible. But only if you can show the CRA exactly how your borrowed money was used. This app handles that tracking for you—automatically calculating which portion of your interest qualifies for deduction.

The Core Concept

Here's what happens when you use borrowed money for investing:

  1. You borrow from a line of credit or HELOC
  2. You transfer that money to your brokerage account
  3. You buy securities with the borrowed funds
  4. Your lender charges interest on the borrowed amount
  5. Because the borrowed money is invested, that interest is tax-deductible

The challenge is that real life gets messy. You might borrow $5,000 but only spend $4,800 on securities. You receive dividends that mix with your borrowed cash. You sell some holdings and buy others. Over time, it becomes nearly impossible to know which dollars are which.

This app solves that problem by tracking every dollar from the moment you borrow it through every transaction until you pay it back.

Quick Start

Your accounts are already set up—one Credit account (your HELOC or line of credit) and one Brokerage account. Here's how to start tracking:

Step 1: Record your first borrow. When you transfer money from your credit line to your brokerage, record a "Borrowing To Invest" event. This creates uninvested borrowed principal—money that's borrowed and waiting to be invested.

Step 2: Record your purchases. When you buy securities, record an "Investment Purchase" event. The app moves the borrowed portion from "uninvested" to "invested" principal, and tracks how much of each holding was funded by borrowing.

Step 3: Record Interest Charge events. When your lender charges interest (usually monthly), record an "Interest Charge" event. The app automatically calculates how much is deductible based on your balance composition during that period.

Step 4: Record payments. When you make payments to your credit account, record a "Credit Payment" event. The app tracks how much of each payment goes to interest versus principal.

That's the basic cycle. Your dashboard always shows your current deductible interest totals.

How Events Work

Every financial event in this app is called an "event." When you record an event, the app automatically updates all your tracked balances. There are eleven types of events:

Each event page explains exactly what happens when you record that event, with examples and the CRA rules that apply.

Key Balances

The app tracks several balances that determine how your interest is split. Here are the most important ones:

Invested Principal is borrowed money currently funding your securities. Interest on this portion is deductible. When you buy securities with borrowed cash, it becomes invested principal.

Uninvested Principal is borrowed money sitting as cash in your brokerage. It's been borrowed but not yet deployed into investments. Interest on this is technically deductible while you're actively looking to invest, though the app tracks it separately to be conservative.

Personal-use Principal is money borrowed for non-investment purposes—or borrowed cash that you withdrew from your brokerage. Interest on this portion is not deductible.

Personal Cash in your brokerage is money that's yours: dividends, capital gains, or deposits from your own funds. It's not borrowed, so it doesn't affect interest deductibility.

The app also tracks outstanding interest (charged but not yet paid), capitalized interest (interest paid by borrowing more), and the borrowed versus personal portions of each security you hold.

Understanding Your Dashboard

Your dashboard shows the numbers that matter most:

Deductible Interest Paid shows how much tax-deductible interest you've paid this year and in previous years. This is the number you'll use on your tax return.

Credit Balance Breakdown shows how your total debt splits between deductible and non-deductible portions, with details on each subcategory.

Brokerage Cash shows your available cash split between borrowed (uninvested principal) and personal funds.

Holdings lists each security with its cost base split between borrowed and personal funding.

Viewing Event Details

Click any event in your ledger to see exactly what changed and why. The detail drawer shows:

  • A plain-English summary of what happened
  • Before and after balances for credit, cash, and securities
  • For interest charges, the full calculation showing how the deductible portion was determined

This transparency means you can always explain and verify any number the app produces.

At Tax Time

When you file your taxes, you need the total deductible interest paid during the tax year. Your dashboard shows this directly—look for "Deductible Interest Paid" in the current year section.

Remember that interest is deductible when paid, not when charged. If your December statement shows $200 in interest but you don't pay it until January, that $200 counts toward next year's deduction.

If you record Interest Capitalization (pay it by borrowing more), it becomes deductible at the time of capitalization—that's when you're effectively "paying" it with new borrowed funds.

Is This App Right for You?

This app works best for straightforward leveraged investing setups:

  • One credit account (HELOC or line of credit) funding one brokerage account
  • A standard revolving credit line where interest is charged periodically
  • A cash brokerage account (not margin)

If you have multiple credit lines funding multiple brokerages, or if you use margin borrowing within your brokerage, this version may not fully capture your situation.

The app assumes your credit account works like a typical line of credit: interest is charged and added to your balance, and payments are applied first to outstanding interest, then to principal.

Getting Help

Each section of this help documentation covers a specific topic. Use these links to find what you need.

Events Reference

Detailed pages for each event type, explaining when to use it, what fields to enter, and exactly how it affects your balances.

Understanding Balances

Deep dive into what each balance means and how they relate to each other.

Technical Reference

Examples

Step-by-step walkthroughs of common scenarios with real numbers.

You'll also find help icons throughout the app. Hover over any "?" to see a quick explanation, with links to learn more.