Personal Finance

Can normal banking fees be tax-deductible?

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  • Nov 4th, 2008 6:26 am
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Member
Aug 12, 2007
255 posts
Toronto/New York Cit…

Can normal banking fees be tax-deductible?

Now, I know a lot of people use PCF and don't pay any monthly fees for their account, but I'm wondering are the banking fees tax-deductible by any chance? Say you get one of those packages at the Big 5 which are $20 per month for example.

I know for private banking, the management and service fees are tax-deductible as they're quite significant (in the thousands per year) to be worth claiming.
12 replies
Deal Addict
Sep 22, 2007
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No banking fees are not deductible unless they are associated with investments.
Deal Guru
Feb 29, 2008
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Montreal
If you have a business, many banking fees are deductible as a business expense. I'm self-employed and I deduct fees for Sefety Deposit box, chequebooks, and the annual fee for my service package.
Deal Addict
Feb 9, 2005
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spf1971 wrote:
Oct 31st, 2008 5:12 am
No banking fees are not deductible unless they are associated with investments.
Isn't money in a bank account essentially an investment as long as the account pays interest? In that case, couldn't you argue the monthy fee is an investment expense associated with the account? Perhaps you could even argue that transaction fees are a cost of selling your "investment".

The fact that there's a cheaper/free alternative isn't an argument against it, because otherwise the same argument would apply to discount brokerages.
Banned
Sep 18, 2008
506 posts
regardless, everyone would need to follow the income tax act.
Deal Fanatic
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Oct 6, 2007
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AllWheelDrift wrote:
Oct 31st, 2008 12:51 pm
Isn't money in a bank account essentially an investment as long as the account pays interest? In that case, couldn't you argue the monthy fee is an investment expense associated with the account? Perhaps you could even argue that transaction fees are a cost of selling your "investment".
no, it is not considered an investment. the bank account is just like keeping money in a box
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Feb 9, 2005
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the_fm wrote:
Oct 31st, 2008 1:10 pm
no, it is not considered an investment. the bank account is just like keeping money in a box
Really? Does that mean I don't have to pay tax on the interest either? Otherwise it seems it would be a double standard.
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Dec 11, 2005
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AllWheelDrift wrote:
Oct 31st, 2008 1:19 pm
Really? Does that mean I don't have to pay tax on the interest either? Otherwise it seems it would be a double standard.
If you have interest big enough to claim then you can deduct the expense for that account against it. But not your other accounts.

IE, if you have a high interest savings account that has a fee and you earn > $50 interest in a year in it and claim it, then yes, you can claim that fee against your capital gain, just like any investment. *IF* however that fee is *ALSO* paying for other services, you *CAN'T* do that, unless you first segregate the fee among the accounts in a reasonable manner (IE, say the fee covers your savings account and also chequeing transactions, but 75% of your transactions were in the chequeing account, you could only claim 25% of the fee against your interest).

This is all pretty moot anyway because pretty much any savings account that pays high enough interest to generate $50+ / year, is no annual fee. High fee accounts are usually heavily transactional and pay little to no interest so they could not be considered investments.
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Jul 26, 2004
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spf1971 wrote:
Oct 31st, 2008 5:12 am
No banking fees are not deductible unless they are associated with investments.
Are stock trading fees deductible?
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Feb 9, 2005
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dgmorr wrote:
Oct 31st, 2008 1:57 pm
Are stock trading fees deductible?
They are factored into the buy/sell price of the stock rather than a straight deduction.
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Jul 1, 2007
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AllWheelDrift wrote:
Oct 31st, 2008 12:51 pm
Isn't money in a bank account essentially an investment as long as the account pays interest? In that case, couldn't you argue the monthy fee is an investment expense associated with the account? Perhaps you could even argue that transaction fees are a cost of selling your "investment".

The fact that there's a cheaper/free alternative isn't an argument against it, because otherwise the same argument would apply to discount brokerages.
The simplest reason why they are not tax deductible is because you are paying for a service from which you benefit. It's not simply a fee for keeping money in a box.
Newbie
Oct 30, 2007
10 posts
Toronto
Originally Posted by dgmorr
Are stock trading fees deductible?
Commissions on the trades when you buy and sell are included as part of the cost (which lowers the taxable capital gain when they are sold).

Management fees for portfolios (when your are just holding the investments) are also deductible as a carrying charge in some cases.

Safety deposit box fees seem to be always deductible as a carrying charge.

If you borrow money to invest outside an RRSP you can deduct the interest paid as a carrying charge. (Provided the investment is primarily to earn interest and dividend income, not capital gains from selling the stock.)

See more information on carrying charges and deductible interest here:
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs ... u-eng.html

Slightly off topic, but investing in Canadian equities to earn dividend income is a really tax-advantaged way to invest. Not only are some stocks yielding up to 6% or more (like BMO and CIBC) since their stock price was hit so hard, but Canadian dividends have their own tax credit, depending on your tax bracket, you might not pay tax on them at all. Plus you can borrow money to invest in them and deduct the interest. Think about it, you are getting paid dividend income with someone else's money, and whatever you paid to borrow it just further reduces your tax bill. If you reinvest your dividends in a DRIP, they increase your adjusted cost base and you will have a lower capital gain when you do decide to sell the shares. (This is because it would be double taxation to pay tax on the dividend income when you received it and the capital gain when you sold it.)

Not only is it thrifty, but it's a fairly conservative way to invest and the payoff is much larger in these panicky times.
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