A margin account lets you borrow from your broker to invest, using the investments already in the account as collateral. It increases what you can buy, and it increases losses by exactly the same proportion. This page explains how margin works in Canada, what triggers a margin call, how margin interest is taxed and what brokers charge. The online broker comparison covers which brokers offer margin accounts.
How margin works
| Feature | How it works |
|---|---|
| Where it is allowed | Non-registered accounts only; TFSAs, RRSPs, FHSAs and RESPs cannot borrow |
| How much you can borrow | Set by a margin requirement for each security; volatile and low-priced securities need more of your own money, and some cannot be bought on margin at all |
| Interest | Charged on the amount borrowed, usually calculated daily |
| Collateral | The securities in the account |
| Margin call | Triggered when your equity falls below the required level |
Margin requirements are set within limits from the Canadian Investment Regulatory Organization, and brokers can set stricter ones. A broker can also raise the requirement on a security at any time, which can itself cause a margin call.
A worked example
Illustrative numbers, not any broker’s actual requirement: you deposit $50,000 and borrow $50,000 to buy $100,000 of shares.
| If the shares… | Portfolio value | Loan | Your equity | Change in your equity |
|---|---|---|---|---|
| Rise 20% | $120,000 | $50,000 | $70,000 | +40% |
| Fall 20% | $80,000 | $50,000 | $30,000 | -40% |
| Fall 50% | $50,000 | $50,000 | $0 | -100% |
Borrowing half the purchase price doubles the percentage move in your own money, in both directions, before counting interest.
When a margin call comes
Suppose the broker requires equity of at least 30% of the portfolio’s value. With a $50,000 loan, equity equals 30% of the portfolio when the portfolio is worth $50,000 รท 0.70 = about $71,429, a fall of roughly 28.6% from $100,000. Below that, you must deposit cash or sell. If prices fall sharply overnight, the broker can sell before you have a chance to respond.
Margin interest and tax
Interest on money borrowed to earn income from investments, such as interest and dividends, is generally deductible as a carrying charge on your tax return, provided the borrowed money can be traced to an income-earning investment held in a non-registered account. If the only return an investment can produce is a capital gain, the interest is not deductible. Interest on money borrowed to contribute to a TFSA, RRSP, FHSA or RESP is not deductible either. Frequent short-term trading on margin raises a separate question: whether the CRA treats your gains as business income, which the day trading guide explains.
What brokers charge
Margin rates are usually expressed as a spread over the broker’s prime or benchmark rate and move when interest rates change. Examples from brokers’ pricing pages as of September 2026:
| Broker | CAD margin rate |
|---|---|
| Wealthsimple | 4.95% (Core), 4.45% (Premium), 3.95% (Generation) |
| Questrade | Tiered: the rate falls as trading activity grows |
| Interactive Brokers | Published schedule; a spread over a benchmark rate |
| Bank-owned brokers | Published on each broker’s rate page |
On a $50,000 balance borrowed for a year at 4.95%, interest would be about $2,475, before any rate changes.
Risks
- Losses larger than your deposit. If prices fall far enough, you can owe the broker money after your holdings are sold.
- Forced selling at low prices. A margin call does not wait for markets to recover.
- Interest cost. Interest accrues whether or not the investments rise.
- Rate and requirement changes. Brokers can change rates and margin requirements with little notice.
Margin and the Smith Manoeuvre
The Smith Manoeuvre borrows against home equity, usually through a readvanceable mortgage rather than a margin account, to invest in a non-registered account so that the interest becomes deductible. It carries similar leverage risks; the Smith Manoeuvre guide covers how it works.
Who uses margin
Margin tends to be used by experienced investors who understand leverage, have income to meet a margin call without selling, and have a specific purpose such as short selling, options strategies or short-term bridge financing. Beginners and anyone who could not cover a margin call from other savings take on the most risk from it. Options traders can compare margin-related features in the options trading platforms comparison.