Accelerated Smith with capitalized interest. Quebec s. 336.1 applied.
Portfolio Y25
560K
From 0
HELOC Y25
330K
Deductible
Net delta
+230K
vs. no-Smith
Cumulative refunds
110K
All reinvested
[ Line chart: Portfolio, HELOC, Net delta from Year 0 to Year 25 ]
Portfolio
Grows from 0 to 560K
HELOC
Grows from 0 to 330K (still deductible)
Net delta
Crosses zero at Year 4. Accelerates after Year 15.
[ Stacked bar: monthly HELOC interest paid vs dividends received per year ]
Cash-flow neutral by Year 11 (dividends cover HELOC interest). Before that, interest capitalizes onto the HELOC balance.
[ Federal deduction, Quebec allowed, Quebec carry-forward pool, per year ]
Quebec carry-forward peaks 42K at Year 8, absorbed fully by Year 22.
[ Tornado chart: net delta sensitivity to return, MTR, HELOC rate, horizon ]
Return is the dominant variable. Below 3.5% gross return the strategy destroys wealth.
Year
Principal
HELOC bal
Portfolio
Refund (QC)
Net delta
1
4.1K
4.1K
4.2K
130
+100
5
5.0K
28K
32K
650
+4K
10
6.5K
72K
92K
1.4K
+20K
15
8.5K
135K
186K
2.7K
+51K
20
11K
220K
330K
4.5K
+110K
25
14.5K
330K
560K
6.8K
+230K
HELOC rate
6.50%
pre-tax
After-tax cost
3.45%
at 47% MTR
Captured spread
+3.55%
per year on invested
Quebec s. 336.1 applied
In Years 1–8, your HELOC interest exceeds your investment income. The provincial portion of the deduction is deferred into a carry-forward pool (peak 42K at Year 8). From Year 9 onward, dividend income absorbs both current-year and accumulated deductions. Terminal carry-forward at Year 25: 0.
If a 40% drawdown hit at Year 15
Portfolio
186K → 112K
HELOC (unchanged)
135K → 135K
Net delta
+51K → -23K (temporary)
If you hold through: recovers to +80K at Year 20 (assuming historical rebound), +230K at Year 25. If you sell: permanent loss of 23K plus all future compounding.