The short answer
A margin account is a regular, non-registered investment account that lets you borrow from your broker, using the stocks you already own as collateral. In Canada you can usually borrow 50% to 70% of what your stocks are worth, and you pay interest on whatever you borrow.
I use a margin account with dividend stocks. It's one of the most powerful tools I know, and one of the most dangerous. So let's go through it with our eyes wide open.
"With great power comes great responsibility." (Uncle Ben)
Everything here is education, not personal financial advice. Your situation is your own.
How margin works in Canada
In Canada, margin rules come from CIRO, the Canadian Investment Regulatory Organization. The key number is the margin requirement: the share of a stock's value you have to cover with your own money. Whatever's left is what you can borrow, called the loan value.
Big, liquid stocks on CIRO's reduced-margin list (about 1,600 of them, including the big banks and utilities) need 30%. You can borrow up to 70% of their value.
Most other stocks priced $2 and up need 50%. You can borrow up to half.
Cheap stocks need more. A stock trading between $1.50 and $1.74 needs 80% (Questrade), and the cheapest can't be borrowed against at all.
Your broker can always ask for more than CIRO's minimum, so check their numbers before you count on any of this.
For example, $10,000 of a big bank stock (30% requirement) lets you borrow up to $7,000. $10,000 of a mid-size stock (50% requirement) lets you borrow up to $5,000.
You pay interest monthly on whatever you borrow. Rates are usually set off the prime rate, so they go up and down with the Bank of Canada.
How I use margin with dividend stocks
I hold boring, stable, dividend-paying stocks in a non-registered margin account. Then I use a small part of the available margin as a tool, two ways.
To buy more of what pays me. The borrowed money buys more dividend stocks right away. If the dividends coming in are bigger than the interest going out, the gap is mine and it compounds.
To borrow instead of selling. When I need money, I can borrow it from my own account instead of selling shares. I keep collecting dividends on everything I own, and the dividends pay the loan back. My nest egg never shrinks. That's what I mean by being your own bank.
An example. I use margin for everything. I pay down my credit cards with it, at a much lower interest rate. I use it to fund other investments. I also use it for personal purchases. Having the freedom to decide when and what I do with it is awesome, but I'm careful not to go crazy. We still need common sense, because it can burn you like any other credit facility.
The catch is simple. Borrowed money makes your losses bigger too, and your broker doesn't care why your stocks fell.
Margin calls: how far can your stocks fall?
A margin call happens when your loan grows bigger than your stocks can support. Here's the rule of thumb that makes it click: the drop that triggers a margin call is roughly 100% minus the share of your available margin you're using.
Say you own $20,000 of big bank stocks. At a 30% requirement, you can borrow up to $14,000.
Use 10% ($1,400): a margin call only if your stocks fall to $2,000, a 90% drop.
Use 30% ($4,200): a call if they fall to $6,000, a 70% drop.
Use 50% ($7,000): a call if they fall to $10,000, a 50% drop.
Use 100% ($14,000): any drop at all triggers a call.
Use all of it and the first bad day gets you a call. Use under 30% and your stocks would have to lose more than two-thirds of their value first. In a bad crash, even solid stocks can fall by a third or more, so the cushion matters.
This is simplified. It ignores interest and dividends, and it assumes the requirement stays at 30%. If CIRO moves your stock off the reduced-margin list, the requirement jumps to 50% and your cushion shrinks overnight.
What a margin call looks like. Your broker tells you to add cash or sell. Questrade, for example, sends notices every morning and gives you a due date, but says it may sometimes close positions immediately without further notice. They pick what to sell and when, usually at the worst possible price.
Interest and taxes
Margin interest can be tax-deductible in Canada when you borrow to earn income, like dividends. You claim it as a carrying charge on line 22100 of your tax return. The CRA's conditions, in plain English:
The money has to go into investments with a reasonable expectation of income. Dividend stocks fit. Something you bought only hoping the price goes up may not.
You have to be able to trace the borrowed money to that investment.
Borrowing for personal use doesn't count. If you borrow from your margin account for a vacation or a car, the interest on that part isn't deductible.
The rest of the tax picture is why I like a non-registered account. Canadian dividends get the dividend tax credit. And when you sell, only half of a capital gain is taxable. I go through the numbers in Why a non-registered margin account is better than an RRSP.
I'm not a tax expert. Ask an accountant how this works for you before you rely on it.
Can you use margin in a TFSA or RRSP?
No. CRA rules don't allow borrowing inside a TFSA, RRSP or other registered account, so margin only works in a regular non-registered account.
Some brokers let a TFSA count as extra collateral for a linked margin account. Questrade calls this Margin Power. Your TFSA stays a TFSA, but if you get a margin call, the broker can sell investments inside your TFSA to cover it. Your tax-free savings could be sold at the worst possible moment, so I'd think twice.
My rules for using margin safely
Use a small part of your available margin. I'd stay under 30%. Just because your broker offers it doesn't mean you should take it.
Only borrow against boring, stable dividend stocks. Big, established companies that pay you to own them, spread across different businesses. Never cheap or speculative stocks.
Make sure the dividends cover the interest. If your dividends don't pay the interest bill, the loan is eating your money instead of making it.
Keep a cash cushion. Have money outside the account you could add if you get a call, so you're never forced to sell at the bottom.
Know your margin-call number. Do the math from the example above for your own account, and write it down.
Don't use margin to buy options. Options are already leveraged. Stacking leverage on leverage is how people lose more than they put in.
Check in once a month. It's a machine, not a slot machine. You don't need to watch it every day, but you do need to look.
Who shouldn't use margin
Margin is not for beginners. Skip it, for now, if any of these sound like you:
You keep running your credit cards back up. Margin would just become one more credit card.
You don't have an emergency fund outside your investments.
You haven't been through a market drop yet and don't know how you'll feel.
You'd lose sleep watching your account fall.
Start with the habit first: pay YourBank first and buy one share at a time. The free Starter Kit walks you through it. Margin can wait until the machine is running.
Quick answers
How much can I borrow on margin in Canada?
Up to 70% of the value of big, liquid stocks on CIRO's reduced-margin list, and up to 50% for most other stocks over $2. Your broker may allow less.
Is margin interest tax-deductible in Canada?
Usually yes, if you borrowed to buy investments that pay income, like dividend stocks. Claim it on line 22100. Interest on money you borrowed for personal spending isn't deductible.
Can I have a margin account in my TFSA or RRSP?
No. Margin only works in a non-registered account.
What happens if I get a margin call?
You add cash or sell investments to bring the loan back under the limit. If you don't, your broker can sell for you, sometimes without warning.
How do I avoid a margin call?
Borrow a small part of what's available. At 30% of your available margin, your stocks would need to fall about 70% before a call.
Sources
CIRO reduced-margin list update, Wealth Professional, May 2026
Margin requirements and margin calls, Questrade
Is margin interest tax deductible?, Questrade, Jan 2026
Margin Power and your TFSA, Questrade
