How do I enter "Accrued Interest" paid when a bond was purchased?

[otr4tax]

When a bond is purchased on the secondary market, you pay "Accrued Interest" as part of the settlement. Where and when do you report this to offset the interest received from that bond? 

My T5 shows the full amount of interest received from that bond not the net.

Example I buy a bond in April 2023 for $x and pay $66 Accrued Interest on that settlement.  The first interest payment of $100 is paid to me in June 2023.  My T5 will show the full $100 interest payment in June so I need to account for the $66 Accrued that I paid.

Accrued Interest doesn't seem to meet the criteria for "Line 22100 – Carrying charges, interest expenses, and other expenses" and is not mentioned as an example in "Line 23200 – Other deductions"

There was a similar question a few years ago but no clear answer. 

[TurboTaxSusan]

Line 22100 does include other expenses, so if there is no other specific place to enter the Accrued Interest amount, you can enter it on Line 22100.

[Dieter613]

Hi TurboTaxSusan,

A follow-on question...

How can I enter this with Turbotax Online?

There is no option to edit the forms directly, one can only answer the interview questions.

Under "Investment Expenses" I have the option to enter "Interest Expenses". 

Here is how Turbotax Online describes it:

<<Enter the total interest you paid on money borrowed if you are using the money to earn investment income, including interest, dividends, and royalty income.>>

My guess is that TurboTax will put the number I enter to line 22100 (can someone confirm this?)

However, the description of the interview question does not include accrued interest from bonds that I paid for. 

So, if I answer the interview question honestly, I cannot enter accrued interest here.

Yet, I find no other place to enter it.

[TurboTaxSusan]

@Dieter613 Yes, if you enter an amount there, then it will go into line 22100. You can see line 22100 on the Detailed Summary page.

To see a detailed summary of your return using TurboTax Online, click the first arrow below your estimated refund amount in the side panel, then select the option for View detailed tax summary. 

[Dieter613]

Thank you!

It is now clear to me how I can enter "accrued interest" and it is great to know that one can see line 22100 even in the online version.

[TurboTaxGinette]

You are welcome.

Thank you for choosing TurboTax.

[otr4tax]

Has anyone completed a return with this approach? Did CRA flag it? 

It seems like it should be an interest expense but the definition of line 22100 doesn't mention this (even on the CRA site). Trying to adjust the interest reported on your T5 seems like it could be an issue that would get flagged.

This must be a common issue for anyone who purchased discounted bonds or generally bonds on the secondary market. 

I have also read that the accrued interest deduction should be made against the first interest received for that bond. In my first example, it all occurred in the same tax year, but your first interest payment could be in the following tax year which would be when you claim the interest paid. 

[TurboTaxGinette]

Yes this would be a question for the Canada Revenue Agency (CRA) as we follow their lead and directions when it comes to creating our software. If needed, you can contact them at 1-800-959-8281. Thank you for your feedback, we appreciate it.

Thank you for choosing TurboTax.