Deductible Interest Tracker

Brokerage Transfer to Credit

Use this event when you move cash from your brokerage account to your credit account. This combines a brokerage withdrawal and a credit payment into a single event.

When to Use

Record this event when you transfer cash from your brokerage to pay down your HELOC or line of credit. This is common when you want to reduce your credit balance using brokerage cash—whether from dividends, sale proceeds, or idle borrowed funds.

If you're making a credit payment using money from outside your tracked accounts (e.g., your bank account), use "Credit Payment" instead. This event is specifically for money flowing from your brokerage to your credit account.

What You Enter

Brokerage withdrawal date — The date the funds left your brokerage account.

Credit deposit date — The date the funds were applied to your credit account. This is often the same day, or one to two business days later.

Personal cash amount — How much of your personal brokerage cash (dividends, gains, deposits) to include in the transfer. The form shows your available personal cash balance.

Borrowed cash amount — How much of your borrowed brokerage cash (uninvested principal) to include in the transfer. The form shows your available borrowed cash balance.

The total transfer amount is derived automatically as the sum of personal and borrowed amounts. At least one must be greater than zero.

Borrowed used for interest (optional, shown only if you have outstanding interest) — When outstanding interest exists, some or all of your transfer goes to interest first. This field lets you choose how much of that interest payment is funded from borrowed cash versus personal cash.

What Happens

This event has up to four effects, applied in order. The app handles all of this automatically based on your inputs.

Step 1: Brokerage Cash Decreases

Cash leaves your brokerage account:

Brokerage Account:

  • Borrowed Cash decreases by the borrowed portion
  • Personal Cash decreases by the personal portion
  • Total Brokerage Cash decreases by the full amount

Step 2: Outstanding Interest Is Paid First

If you have any outstanding interest on your credit account, your transfer pays it before anything goes to principal. This is mandatory—you cannot skip interest.

The amount applied to interest is the lesser of your transfer amount and total outstanding interest. The settlement is split proportionally between eligible and non-eligible interest.

Credit Account:

  • Outstanding Eligible Interest decreases proportionally
  • Outstanding Non-Eligible Interest decreases proportionally

Step 3: Borrowed Interest Is Capitalized

If any of the interest payment was funded from borrowed cash, that portion is reclassified into capitalized interest principal. This is similar to what happens during Interest Capitalization—borrowed money used to pay interest becomes new principal.

Credit Account:

  • Capitalized Deductible Interest increases (for the eligible share of borrowed interest)
  • Capitalized Non-Deductible Interest increases (for the non-eligible share of borrowed interest)

Step 4: Remaining Amount Pays Principal

Any transfer amount left after settling interest is applied to principal. The personal-funded portion reduces your credit balance using the same proportional allocation rule as Credit Payment. The borrowed-funded portion cancels out (it was borrowed from credit and is now returning to credit).

Credit Account:

  • Invested Principal decreases proportionally
  • Uninvested Principal decreases proportionally
  • Capitalized Deductible Interest decreases proportionally
  • Personal-use Principal decreases proportionally
  • Capitalized Non-Deductible Interest decreases proportionally

The proportional allocation uses balances after the borrowed-portion cancellation, following the same CRA rules as regular Credit Payment.

Example: Simple Transfer, No Outstanding Interest

You have $2,000 personal cash and $3,000 borrowed cash in your brokerage. Your credit balance is $10,000 (all deductible). No outstanding interest. You want to pay down $1,500.

Event: Brokerage Transfer to Credit

  • Personal cash: $1,500
  • Borrowed cash: $0

Total transfer: $1,500

Before:

  • Borrowed Cash: $3,000
  • Personal Cash: $2,000
  • Total Debt: $10,000

After:

  • Borrowed Cash: $3,000 (unchanged)
  • Personal Cash: $500
  • Total Debt: $8,500

You used personal cash to reduce your credit balance. No change to borrowed balances, and your debt decreased by $1,500.

Example: Transfer With Outstanding Interest

You have $500 personal cash and $4,000 borrowed cash. Your credit balance is $10,000 with $200 outstanding interest ($160 eligible, $40 non-eligible). You want to transfer $1,000.

Event: Brokerage Transfer to Credit

  • Personal cash: $500
  • Borrowed cash: $500
  • Borrowed used for interest: $0 (default—use personal cash for interest first)

Total transfer: $1,000

Calculation:

  • Outstanding interest: $200
  • Interest paid first: $200 (all of it, since transfer exceeds interest)
    • Funded by: $200 personal, $0 borrowed
    • Eligible settled: $160, Non-eligible settled: $40
  • Remaining to principal: $800
    • Personal-funded principal: $300
    • Borrowed-funded principal: $500 (cancels out—returning borrowed money)

After:

  • Outstanding Interest: $0
  • Deductible Interest Paid YTD increases by $160
  • Total Debt decreases (principal reduced by the personal portion of the principal payment, allocated proportionally)

Example: Borrowed Cash Used for Interest

Same situation, but you want the interest payment funded entirely from borrowed cash.

Event: Brokerage Transfer to Credit

  • Personal cash: $500
  • Borrowed cash: $500
  • Borrowed used for interest: $200 (fund all $200 interest from borrowed)

Total transfer: $1,000

What changes:

  • Interest is still settled ($160 eligible, $40 non-eligible)
  • But since it was funded from borrowed cash, the interest is capitalized:
    • Capitalized Deductible Interest increases by $160
    • Capitalized Non-Deductible Interest increases by $40
  • The remaining borrowed portion ($300) goes to principal cancellation
  • Personal cash ($500) goes entirely to principal repayment

This approach preserves personal cash for principal reduction rather than interest. The trade-off is that capitalized interest adds to your principal balance, though it was already owed as outstanding interest.

Default Behavior

Both personal and borrowed cash amounts start at zero—you enter the amounts you want to transfer from each source. The form shows your available balance for each, so you can see exactly how much is available.

If outstanding interest exists and you don't customize the interest funding split, the app uses personal cash for interest first:

  • Borrowed for interest defaults to: max(0, Interest Amount - Personal Portion)

This default minimizes the amount of borrowed cash reclassified as capitalized interest, which is usually what you want.

Why This Matters

This event exists because transferring brokerage cash to credit is a common operation that combines multiple effects. Recording it as separate "Brokerage Cash Withdrawal" + "Credit Payment" events would produce incorrect results—the withdrawal would reclassify borrowed cash as personal-use debt before it reaches the credit account.

By combining the steps into one atomic event, the app correctly tracks that borrowed cash going from brokerage to credit is returning to where it came from, not being diverted for personal use.

Common Questions

Why can't I skip paying interest first? This reflects how credit accounts actually work. When you make a payment, your lender applies it to outstanding interest before principal. The app mirrors this real-world behavior.

When should I use this versus Credit Payment? Use this event when the money is coming from your brokerage account. Use Credit Payment when the money is coming from outside your tracked accounts (bank account, employment income, etc.).

What if I want all borrowed cash to go to interest? You can set "Borrowed used for interest" up to the lesser of your borrowed portion and the interest amount. This causes the borrowed-funded interest to be capitalized.

Does the borrowed portion that goes to principal reduce my debt? The borrowed-funded principal cancels out rather than reducing your net debt—you're returning borrowed money, which reduces both the asset (brokerage cash) and the liability (credit balance). Only the personal-funded principal truly reduces your net debt.

What if my transfer exceeds my credit balance? The app validates that your transfer doesn't exceed your total credit balance (principal plus outstanding interest). If it does, reduce the transfer amount.

CRA Basis

This event combines the effects of a brokerage withdrawal and credit payment into a single operation. The CRA rules are the same as those governing each component:

  • Interest settlement: Interest is paid proportionally between eligible and non-eligible portions.
  • Principal repayment: Follows the proportional allocation rule from Income Tax Folio S3-F6-C1, paragraph 1.43.
  • Interest capitalization: Borrowed funds used to pay interest are treated consistently with paragraph 1.38—interest on borrowed money used to pay deductible interest is itself deductible.

The key advantage of this event is maintaining proper traceability. Cash flowing directly from brokerage to credit preserves its character as borrowed or personal, unlike a withdrawal-then-payment sequence that would break the tracking chain.

Related Events

Credit Payment — Pay your credit account using external funds (not from your brokerage).

Brokerage Cash Withdrawal — Withdraw cash from your brokerage for personal use.

Interest Capitalization — Pay interest by borrowing more from the same account, without any cash movement.

Borrowing To Invest — The opposite direction—transfer borrowed funds from credit to brokerage.