What is the Smith Manoeuvre?

The Smith Manoeuvre is a Canadian debt-conversion strategy that uses a readvanceable mortgage to borrow against paid-down principal and invest in a non-registered account.

Is HELOC interest tax deductible in Canada?

HELOC interest may be deductible when borrowed money is used to earn income from eligible investments. Confirm your specific implementation with a CPA.

Should I use DRIP or cash dividends with the Smith Manoeuvre?

Cash dividends are often used to prepay the mortgage and create more HELOC room, while DRIP can compound the portfolio but may slow mortgage conversion.

Can I use ETFs in a Smith Manoeuvre portfolio?

ETFs can be used, but return of capital and adjusted cost base tracking can complicate interest deductibility records. Confirm treatment with a CPA.

What is the Income Coverage Milestone?

The Income Coverage Milestone is the year when projected SM portfolio income is enough to cover projected annual HELOC interest.

Prospyr calculator

Smith Manoeuvre Calculator Canada

See when borrowed investing, deductible HELOC interest, tax refunds, and dividend income can turn mortgage conversion into a self-funding income engine.

Inputs

Seven starter fields. Advanced assumptions stay tucked away until you want them.

Home Value

Mortgage Balance

Mortgage Rate

Use your actual rate, not the posted rate.HELOC rate, typically prime + 0.5%

Amortization Remaining: 20 years

11530

Province

Annual Income

Used to estimate your marginal tax rate and annual HELOC interest refund.

Estimated marginal rate: 37.2% (ON 2026)

HELOC room at 80% LTV : $140,000

Calculate your marginal tax rate

Important: The Smith Manoeuvre is a legal Canadian tax strategy, but its benefits depend on your specific circumstances, risk tolerance, and proper implementation. HELOC interest is deductible only when borrowed funds are used to earn income from eligible investments. Confirm this with a CPA before acting. This calculator is for educational purposes only and does not constitute financial, tax, investment, or legal advice. Consult a licensed financial advisor, CPA, and mortgage broker before implementing the Smith Manoeuvre. CRA may audit deductibility claims if records are not properly maintained.

Without SM

$318,702

Total interest paid

Mortgage payoff timeline20 years

Net worth at payoff$800,000

With SM

Income Coverage Milestone

Year 9

Accelerated payoff timeline13 years, 6 months

Total deductible HELOC interest$128,131

Annual tax refund / cumulative$4,159 / $47,613

Portfolio value at payoff$327,784

Net worth at payoff$1,220,680

SM net benefit

$420,680

Final coverage ratio : 1.35x

The SM generates a modest benefit at your income level and current rates. The Income Coverage Milestone is reached in 9 years, but the net benefit of $420,680 may not justify the complexity for everyone. Consider the stress test in Advanced mode.

This is informational only, not licensed financial advice.

See all three debt strategies side-by-side Model DRIP compounding on your SM portfolio Calculate your marginal tax rate

The Smith Manoeuvre requires a non-registered account. Open one with Questrade: no account minimums, commission-free ETFs, and DRIP-eligible Canadian dividend stocks.

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Freshness and methodology

Last reviewed

April 2026 with 2026 CRA planning inputs.

Methodology

Smith Manoeuvre projections use standard mortgage amortization, readvanceable HELOC capacity, 2026 marginal tax-rate schedules, dividend income assumptions, and a year-by-year Income Coverage Milestone.

Source

CRA official reference →

Updated for 2026 CRA limits · Last verified April 2026

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