Are loans taxable in Canada?

In most cases, no—the money you receive from a loan in Canada is not taxable income.

Whether it’s a personal loan, line of credit, student loan, car loan, mortgage, or credit card, the lump sum you borrow generally doesn’t get reported as income because you’re expected to pay it back.

You can still face tax consequences in some situations (like forgiven debt), but the act of borrowing itself is usually not taxable.

KOHO Line of Credit

With the KOHO Line of Credit, you can:

• Apply online for about $1,000–$15,000 in available credit

• Get interest rates as low as 19.9%

• Only pay interest on what you actually use, not on your full limit

• Avoid extra charges—no late, annual, or origination fees, just the interest on what you borrow

• Apply without a hard credit hit; checking if you qualify won’t impact your credit score

The money you draw from a KOHO line of credit is borrowed funds, not taxable income. Your responsibility is to manage it carefully and repay it, not report it as income.

So When Can Loans Affect Your Taxes?

While the borrowed money itself isn’t usually taxable, loans can still show up in your tax life in a few ways:

1. If Part of the Loan Is Forgiven

If a lender forgives or cancels some or all of what you owe (for example, certain business loans or negotiated settlements), that forgiven amount may be treated as taxable income or have other tax consequences, depending on the situation.

For everyday personal loans, this is less common, but it’s something to be aware of if you ever settle a large debt for less than you owe.

2. If You Borrow to Invest or Run a Business

If you use a loan or line of credit for investment or business purposes:

• The money you invest or put into your business is still not taxable

• But any returns you earn (interest, dividends, capital gains, business income) can be taxable

• In some cases, the interest you pay on that borrowing may be tax-deductible as an investment or business expense

This is a more advanced use case and worth talking about with a tax professional.

Is the Interest I Pay Tax-Deductible?

For most personal borrowing (like a personal line of credit used for groceries, travel, or general spending), the interest you pay is not tax-deductible. It’s just a cost of borrowing.

Interest may become deductible when:

• The borrowed money is used to earn income (for example, certain investments or business activities), and

• The situation meets CRA’s rules around deductibility

Again, this is where professional advice is helpful if you’re borrowing for anything more complex than regular personal spending.

Quick Recap

• Loans and lines of credit are generally not taxable in Canada.

• The money you borrow isn’t income—you’re expected to pay it back.

• Tax issues can arise if debt is forgiven or if the money is used in ways that create taxable returns or deductions.