Interest & Bank Charges on Your T2125
From Stripe fees to business loan interest, every dollar of banking costs you incur for your business is deductible — with a few important caps to know.
What You Can (and Can't) Deduct
Know exactly what belongs on Line 8710 — and what the CRA says doesn't qualify.
What Qualifies
- Interest on business loans and lines of credit
- Interest on credit cards for business purchases
- Bank service charges and monthly account fees
- Merchant processing fees (Square, Stripe, PayPal, Shopify Payments)
- NSF (non-sufficient funds) charges on business accounts
- Financing fees for loans of $500 or more (deductible over 5 years at 20%/year)
- Wire transfer fees and currency conversion charges for business transactions
- Interest on mortgages for business property (interest only, not principal)
Does NOT Qualify
- Interest on personal loans or personal credit card balances
- Principal portion of loan repayments (only interest is deductible)
- Interest on money borrowed for personal use
- Penalties for tax reassessments or late tax filings
- Interest on loans used to acquire vacant land (capped at income from the land)
Rules & Limits
Special CRA rules and percentage limits that apply to interest & bank charges.
Special Rules
Passenger Vehicle Interest Cap
Heads upInterest on loans for passenger vehicles is capped at $350 per month (for 2025 loans). This limit applies to the interest portion only — principal repayments are never deductible.
Regulation 7307(1)Vacant Land Interest Limitation
Heads upInterest on money borrowed to purchase vacant land is limited to the amount of income the land generates. Any excess interest can be added to the cost of the land.
Financing Fee Amortization
AdvantageFees, premiums, and other costs to arrange financing for loans of $500 or more are deductible at 20% per year over 5 years. If the loan is repaid early, the remaining unamortized balance can be deducted in that year.
Mortgage Interest vs. Principal
Heads upIf you have a mortgage on a business property, only the interest portion of each payment is deductible. The principal repayment is not a deductible expense.
Percentage Limits
| Rule | Limit |
|---|---|
| Vehicle loan interest | $350/month max |
| Financing fees | 20%/year over 5 years |
Real-World Examples
See how different professionals use Line 8710 deductions in practice.
Annual Stripe Processing Fees
Paid Stripe 2.9% + $0.30 per transaction on all online sales throughout the year.
$4,200
$4,200 (100%)
Business Credit Card Annual Fee + Interest
Paid the annual fee and carried a balance on a business credit card used for software subscriptions and equipment.
$380
$380 (100%)
Monthly Vehicle Loan Interest (Capped)
Paid $420/month in interest on a vehicle loan for a car used 90% for business. Capped at $350/month.
$5,040 (actual) → $4,200 (capped at $350/mo × 12)
$4,200 (at cap)
Common Mistakes to Avoid
These errors on Line 8710 can trigger a CRA review — here's how to get it right.
Forgetting to deduct merchant processing fees (Stripe, Square, PayPal)
Payment processing fees are a legitimate business expense. Review your monthly statements from Stripe, Square, PayPal, or Shopify and claim all processing fees on Line 8710.
Claiming principal repayments as interest
Only the interest portion of loan payments is deductible. The principal repayment reduces your debt but is not an expense. Review your loan statements to separate interest from principal.
Not tracking credit card interest on business purchases separately
If you use the same credit card for personal and business purchases, you must track and claim only the interest attributable to business charges. Consider using a dedicated business credit card.
Commonly Confused Categories
These categories are often mixed up with Interest & Bank Charges. Here's the difference.
Sample Receipt Walkthrough
See how ScanForTax processes a typical interest expense.
Stripe Inc.
2025-03-31
Ontario
How ScanForTax categorizes this
ScanForTax imports your Stripe fee statements and categorizes them under Interest and Bank Charges (Line 8710). Payment processing fees have no GST/HST component, so there are no ITCs to claim — but the full amount is deductible.
Frequently Asked Questions
Are credit card interest charges deductible?
Can I deduct Stripe or PayPal fees?
Is there a limit on vehicle loan interest?
Related Professions
Profession-specific guides that frequently use Interest deductions.
Tax Guides by Province
See how tax recovery works for interest expenses in each province.
Related Expense Categories
Tax deadline is April 30th.
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