Borrowing For Personal Use
Use this event when you withdraw borrowed funds from your credit account for purposes other than investing.
When to Use
Record this event when you borrow money from your HELOC or line of credit for personal expenses—home renovations, a vacation, a car purchase, or any other non-investment purpose.
This event is important for accurate tracking. If you borrow for personal use but don't record Borrowing For Personal Use, the app won't know about that debt, and your deductible interest calculations will be wrong.
What You Enter
Amount — The total amount you're borrowing for personal use.
Date — The date you withdrew the funds from your credit account.
What Happens
When you record this event, your balances change as follows:
Credit Account
Your credit balance increases, but in the non-deductible category:
- Personal-use Principal increases by the full amount
- Total Non-Deductible Debt increases by the full amount
This debt is classified as non-deductible because it's not connected to investing. Interest charged on personal-use principal cannot be claimed as a tax deduction.
Brokerage Account
No changes. The borrowed funds go directly to personal use without passing through your brokerage.
Interest Implications
From this point forward, a portion of the interest your lender charges will be non-deductible. When you record an Interest Charge, the app calculates how much of your balance was personal-use versus investment-related, and splits the interest accordingly.
Example
You have an existing HELOC balance of $15,000, all of which is invested (deductible). You need $5,000 for a home repair.
Event: Borrowing For Personal Use
- Amount: $5,000
- Date: March 10
Before:
- Invested Principal: $15,000
- Personal-use Principal: $0
- Total Debt: $15,000 (100% deductible)
After:
- Invested Principal: $15,000
- Personal-use Principal: $5,000
- Total Debt: $20,000 (75% deductible, 25% non-deductible)
When your next Interest Charge comes, approximately 75% will be deductible (the portion attributable to your invested principal) and 25% will be non-deductible (the portion attributable to personal use).
Why This Matters
Many people use their HELOC for both investing and personal expenses. Without tracking, it's impossible to know how much interest is deductible.
Consider this scenario: You have a $50,000 HELOC balance and pay $200/month in interest. Is that $200 deductible? It depends entirely on what the $50,000 was used for. If $30,000 was invested and $20,000 was personal, only about $120 of each interest payment is deductible.
By recording personal borrowing, you maintain the audit trail the CRA requires.
Common Questions
What if I've already borrowed for personal use but didn't track it? You can record past events with their original dates. Go through your records and add "Borrowing For Personal Use" events for any personal borrowing. The app will recalculate all your balances and interest allocations.
Can I later convert personal-use debt to investment debt? Not directly. Once money is borrowed for personal use, the CRA considers that debt permanently non-deductible. However, you can pay down the personal-use portion and borrow fresh funds for investing. The app tracks these as separate debt pools.
What counts as "personal use"? Anything that isn't investing in income-producing assets. Vacations, cars, renovations, consumer goods, paying off other debts, gifts—all personal use. Even using borrowed money to contribute to a TFSA is considered personal use because TFSA income is tax-free (not taxable income that would justify the interest deduction).
What if I'm not sure whether something counts as investment? When in doubt, classify it as personal use. Being conservative protects you in an audit. The CRA is strict about the "direct use" requirement—borrowed funds must be directly traceable to investments that produce taxable income.
CRA Basis
Income Tax Folio S3-F6-C1 establishes that interest is only deductible when borrowed money is used for the purpose of earning income from business or property. The Folio specifically states that interest on money borrowed for personal purposes is not deductible.
The app enforces this by maintaining separate pools for investment-related and personal-use debt, ensuring that only the investment portion generates deductible interest.
Related Events
Borrowing To Invest — Use this when borrowing for investment purposes.
Credit Payment — When you pay down your credit account, payments reduce both deductible and non-deductible principal proportionally.