Glossary
Definitions of the key terms used in Canadian leveraged investing and interest deductibility tracking. Each term links to the Learn page where it's explained in context.
Adjusted Cost Base (ACB)
The total cost of a security for tax purposes, including purchase price and adjustments for return of capital. Canada requires averaging across all units of the same security.
Average Daily Balance Method
The standard financial method used to allocate interest across a period where balances change. Each day's balance is weighted by its duration, then the total interest is distributed proportionally. Banks use this same approach for deposit accounts and credit lines. See How interest is time-weighted.
Borrowed Cash
Cash in your brokerage that came from borrowed funds and hasn't been invested yet. When margin debt is outstanding, the brokerage is generally in margin state rather than holding positive borrowed cash.
Borrowed Cost Base
The portion of a security's cost that was funded with borrowed money. Determines what portion of sale proceeds affects your debt ratio. See Selling holdings.
Brokerage Margin
Debt owed to your brokerage when transactions exceed available brokerage cash. Margin debt is tracked by purpose because interest may be deductible or non-deductible depending on how the borrowed funds were used. See Brokerage margin.
Capitalized Deductible Interest
Principal created when you borrow to pay deductible interest charges. Interest on this principal is itself deductible. See Interest capitalization.
Capitalized Non-Deductible Interest
Principal created when you borrow to pay non-deductible interest charges. Interest on this principal remains non-deductible. Tracked within the non-deductible principal balance (not as a separate sub-balance).
Deductible Principal
Borrowed money currently tied to investments. Interest charged on this portion is tax-deductible. Includes invested principal and capitalized deductible interest.
Income Tax Folio S3-F6-C1
The CRA's comprehensive guidance on interest deductibility. The primary authority for the rules this app implements. Read the full folio on canada.ca. See CRA rules applied.
Interest Capitalization
Paying interest by borrowing more from your credit line. This is used when interest was added to the credit balance and you settle that outstanding interest by borrowing more from the same account. See Interest capitalization.
Invested Principal
Borrowed funds that have been deployed into securities. Interest charged on this portion is deductible because the funds are traceable to an investment purpose. See how balances are tracked.
Margin Interest
Interest charged by the brokerage on margin debt. The app splits it between deductible and non-deductible portions using margin-side balances, then adds it directly to margin debt. See Margin Interest Charge.
Margin State
A brokerage state where margin debt is outstanding. Incoming cash normally repays margin before becoming brokerage cash.
External Account
An external account (e.g. chequing or savings) where some lenders charge HELOC interest. The app tracks which external accounts are used. See Interest Charge.
Non-Deductible Principal
Borrowed money NOT tied to income-producing investments. Tracked as a single balance that includes idle borrowed cash, personal borrowing, and capitalized non-deductible interest. The app does not break this down further. Interest on this portion is not deductible.
Outstanding Interest
Interest charged by the lender but not yet paid. Not deductible until paid (cash-basis timing). Split into outstanding eligible and outstanding non-eligible based on the balance composition when charged. See how balances are tracked.
Personal Cash
Cash in your brokerage that is yours — dividends, gains, deposits. Not tied to borrowed funds and doesn't affect interest deductibility.
Personal Cost Base
The portion of a security's cost funded with your own money. Sale proceeds from this portion are yours to use freely.
Personal-Use Borrowing
Amounts borrowed for non-investment purposes. These are included in non-deductible principal. Interest on this portion is not deductible. See Mixed HELOC use.
Proportional Repayment
CRA rule (¶1.43): when you pay down a mixed credit balance, the payment is allocated proportionally between deductible and non-deductible portions. You cannot target the personal portion first. See Mixed HELOC use.
Return of Capital (RoC)
A distribution from a security that is not income — it's a return of your invested principal. Reduces your cost basis and can change your deductible debt ratio. See Return of Capital.
Refinancing
Replacing one lender's debt with another while preserving the debt's deductible or non-deductible character. For example, a credit advance can repay brokerage margin, or a brokerage-to-credit transfer in margin state can move debt from credit to margin.
Smith Manoeuvre
A Canadian strategy for converting non-deductible mortgage interest into deductible investment loan interest, typically using a readvanceable HELOC.
Superficial Loss Rule
A CRA rule that denies a capital loss when you sell a security and buy the same security back within 30 days before or after the sale (in any of your non-registered accounts, or by an affiliated person such as a spouse) and still hold it at the end of that window. The denied loss is added to the adjusted cost base of the repurchased shares, deferring it to a future sale. See Investment Sale.
Tracing Principle
The CRA's requirement that interest deductibility follows the current use of borrowed funds, not the original intent. You must trace each borrowed dollar to its use. See How interest deductibility works.