FAQ: How to Set Up the Smith Maneuver

The Smith Maneuver involves leverage, debt, and risk. If you are considering this strategy please consult your financial advisor. This is not tax advice, investment advice, or financial advice.

There are many variations of the Smith Maneuver, this is just a general guide on how to add a tax deductible investment loan on the platform.

Step 1: Ensure you have an "Investment Loan" entered in Discovery > Debts. This loan does not need to have a balance (enter $0 if needed). Make sure the interest rate is accurate. By indicating "Investment Loan" as the type of debt this is signalling to the platform that this is tax deductible interest. Even if it is a HELOC you're using, enter it as "Investment Loan".

Here we have the investment loan and the mortgage.

Step 2: In Planning > Projections > Table, scroll to the right to find the debt columns and open the debts using the ">" arrow. Increase your mortgage payments by a lump sum amount by overriding the payment. Enter an equal but negative lump sum override value to the investment loan. This is decreasing the the mortgage principal, paying down non-deductible debt, and increasing the investment loan principal, increasing tax deductible debt. The net debt amount hasn't changed.

Before Override:

After Override:

Step 3: Ensure a Non-Registered Investment account is active in your Profile and check that in Planning > Projections > Table that the platform is adding the withdrawal from the investment loan to the Non-Registered account as a contribution. If your TFSAs and RRSPs are maximized then this should happen automatically. But you may need to add an override to ensure the investment loan withdrawal ends up in the non-reg. account.