Deductible Interest Tracker

Brokerage Cash Withdrawal

Use this event when you take cash out of your brokerage account.

When to Use

Record this event when you withdraw cash from your brokerage for any purpose—transferring to your bank account, paying bills, or any other use. This is important because withdrawing borrowed cash changes its classification from investment-related to personal-use debt.

What You Enter

Date — The date you withdrew or transferred the funds out of your brokerage.

Personal cash — The portion of the withdrawal funded by personal brokerage cash.

Borrowed cash — The portion of the withdrawal funded by borrowed brokerage cash.

Total — Calculated automatically as: personal cash + borrowed cash

What Happens

When you withdraw cash, the split between personal and borrowed cash determines the impact on deductibility.

If Withdrawing Borrowed Cash

Credit Account:

  • Uninvested Principal decreases by the borrowed amount
  • Personal-use Principal increases by the borrowed amount

This is the critical change. Borrowed money that was available for investing is now reclassified as personal-use debt. Interest on that portion will no longer be deductible.

Brokerage Account:

  • Borrowed Cash decreases by the borrowed amount
  • Total Brokerage Cash decreases by the borrowed amount

If Withdrawing Personal Cash

Brokerage Account:

  • Personal Cash decreases by the personal amount
  • Total Brokerage Cash decreases by the personal amount

Personal cash withdrawals have no effect on your credit account or interest deductibility. It's your money—dividends, gains, or funds you deposited.

Mixed Withdrawals

You can enter both personal and borrowed amounts in the same withdrawal. The app derives the total and applies each portion to the correct balances.

Example: Withdrawing Personal Cash Only

You have $500 in personal cash (dividends) and $2,000 in borrowed cash. You withdraw $400 for personal use.

Event: Brokerage Cash Withdrawal

  • Personal cash: $400
  • Borrowed cash: $0
  • Total (derived): $400

Before:

  • Borrowed Cash: $2,000
  • Personal Cash: $500

After:

  • Borrowed Cash: $2,000 (unchanged)
  • Personal Cash: $100

No impact on deductible interest. You withdrew your own money.

Example: Withdrawing Borrowed Cash

Same situation, but you withdraw $1,000.

Event: Brokerage Cash Withdrawal

  • Personal cash: $500
  • Borrowed cash: $500
  • Total (derived): $1,000

After:

  • Personal Cash: $0
  • Borrowed Cash: $1,500
  • Personal-use Principal: $500 (increased from $0)
  • Uninvested Principal: $1,500 (decreased from $2,000)

The $500 that came from borrowed cash is now personal-use principal. Going forward, interest on that $500 is not deductible.

Example: Intentional Borrowed-Only Withdrawal

You have $1,000 personal cash and $3,000 borrowed cash. You need to withdraw $2,000 and want it all to come from borrowed cash (perhaps you're doing a debt restructuring).

Event: Brokerage Cash Withdrawal

  • Personal cash: $0
  • Borrowed cash: $2,000
  • Total (derived): $2,000

After:

  • Personal Cash: $1,000 (unchanged)
  • Borrowed Cash: $1,000
  • Personal-use Principal increases by $2,000
  • Uninvested Principal decreases by $2,000

By specifying borrowed cash directly, you controlled which cash funded the withdrawal.

Why This Matters

The moment borrowed cash leaves your brokerage for personal use, the CRA can no longer trace it to an investment purpose. The debt remains, but it's no longer connected to investing.

Consider this scenario: You borrow $20,000 to invest but withdraw $5,000 for a vacation before investing it all. That $5,000 is immediately personal-use debt. Interest on it isn't deductible—even though you originally borrowed with the intention of investing.

This is why recording cash withdrawals is important. It maintains the accurate tracking the CRA requires.

Common Questions

What if I'm withdrawing to pay down my credit account? Use Brokerage to Credit Transfer. That event is designed for moving brokerage cash into credit and handles the split logic for interest and principal effects.

Can I withdraw borrowed cash and have it remain deductible? Generally, no. If borrowed cash leaves your brokerage for personal use, it becomes personal-use debt. The one exception is if you immediately use it for another investment (like buying securities in a different account), but that scenario is complex and beyond what this app tracks.

What if I need to withdraw but have only borrowed cash? The withdrawal will convert borrowed cash to personal-use debt. That's the reality of your situation—you're using borrowed money for non-investment purposes. Consider whether you can use other funds instead.

What about withdrawing to pay taxes? Withdrawing to pay income tax is personal use. Even if the taxes were generated by your investments, using borrowed money to pay taxes doesn't make that interest deductible. However, if you sell securities and withdraw the proceeds to pay the resulting capital gains tax, the portion that came from personal cash (including gains) is fine—only the borrowed portion becomes personal-use.

CRA Basis

Income Tax Folio S3-F6-C1 requires that borrowed funds be traceable to income-earning purposes for interest to be deductible. When borrowed funds are withdrawn for personal use, that traceability is broken.

The app implements this by reclassifying withdrawn borrowed cash from uninvested principal (potentially deductible) to personal-use principal (not deductible).

Related Events

Borrowing To Invest — The opposite event—bringing borrowed funds into your brokerage.

Brokerage to Credit Transfer — Move brokerage cash to the credit account.

Investment Purchase — Use borrowed cash for investing instead of withdrawing it.