Home / Financial Tools / Interest Deductibility Tracing Tool
Corporate & Personal Tax
Interest Deductibility Tracing Tool
What secures a loan doesn't determine whether the interest is deductible. What the borrowed money was actually used for does.
Reading This Tool
How To Use This Calculator
Enter the loan amount and rate, then trace where the money actually went.
The direct use test, confirmed by the Supreme Court in Singleton and Bronfman Trust, looks at what the borrowed funds were used to acquire or fund, not what collateral secures the loan. Money traced to an income-earning investment or active business generally supports deductible interest, money traced to a personal use does not, regardless of how the loan itself is secured.
Your Inputs
Deductibility Split
-Annual Deductible Interest
$0
Total Annual Interest
$0
Non-Deductible Interest
$0
Interest: Deductible vs. Non-Deductible
If loan proceeds are commingled in a single account with both deductible and non-deductible uses, tracing becomes far harder to support on audit. Keeping separate accounts for separate uses from day one is the single most effective way to protect a deduction.