Leverage Wisely.

Borrow With Purpose.

Toronto, Canada

Margin vs. Securities-Backed Line of Credit (SBLOC)

At Houndstooth, we help clients understand the two distinct ways to access liquidity from their investment portfolios. While both involve borrowing against your investments, they serve very different purposes.

Margin

Borrowing money from your brokerage account to buy more securities.

  • Purpose: To leverage your investments and potentially increase returns.

  • Borrowing Capacity: Up to 100% of your account value, depending on brokerage and regulations.

  • Tax Treatment: Interest paid on margin loans may be tax-deductible if the funds are used for investment purposes.

SBLOC

A loan secured by your portfolio, but not tied to buying additional securities.

  • Purpose: To provide liquidity for non-investment needs — such as purchasing a car or paying bills.

  • Borrowing Capacity: Typically up to 50% of your portfolio value.

  • Tax Treatment:
    Interest paid on an SBLOC is not tax-deductible, as the loan is for personal use.

Using Margin and SBLOC

Margin can amplify returns when carefully managed inside the portfolio, while an SBLOC can provide liquidity for life’s needs without selling investments.

  • Margin is borrowing money inside your brokerage account to buy more securities and amplify investment returns.

    • Margin interest is tax-deductible because it’s tied to investing.

    • Best used to expand your portfolio without selling other investments.

    • Requires careful monitoring to avoid margin calls during market dips.

    When to use:

    • To grow your portfolio faster with strategic leverage.

  • An SBLOC is borrowing against your portfolio for personal needs without selling assets.

    • Funds can be used for anything — like buying a car, covering taxes, or personal expenses.

    • Interest is not tax-deductible since it's for personal use.

    • Keeps your portfolio fully invested and compounding.

    When to use:

    • To access liquidity without triggering capital gains or disturbing your investments.

  • Using both margin and SBLOC strategically gives you investment flexibility and personal liquidity:

    • Margin boosts your portfolio returns.

    • SBLOC gives you cash for personal spending.

    • Separating the two keeps your portfolio working hard while optimizing tax benefits.

    Example:
    Borrow on margin to buy more stock during a dip, and use SBLOC to fund a major life expense — all without selling core investments.

    • Margin = Investment growth with tax-deductible interest.

    • SBLOC = Personal liquidity without selling investments.

    • Combined = Maximize portfolio growth and cash access while minimizing taxes.

Buy, Borrow, Die Strategy

Is it the best for you?

The Buy, Borrow, Die strategy is a powerful approach to building and preserving wealth over multiple generations. Instead of selling investments and triggering taxes, you simply buy investments, borrow against them when you need liquidity, and pass them on tax-free at death.

    • Continuously invest in high-quality assets — stocks, real estate, businesses — and hold them for the long term.

    • Focus on growth and compounding without triggering taxable events like selling.

    • Rather than selling assets to access cash, you take out a Securities-Backed Line of Credit (SBLOC) or another collateralized loan against your portfolio.

    • This borrowing allows you to use the value of your investments without selling them, avoiding capital gains taxes.

    • Borrowed money isn’t considered taxable income.

    • When you pass away, your heirs inherit your assets at a step-up in cost basis — meaning the assets’ value is reset to their fair market value on your date of death.

    • This eliminates the unrealized capital gains you accumulated during your lifetime, resulting in no capital gains tax bill for your heirs.

    • No capital gains taxes during your life.

    • Liquidity without selling investments.

    • Tax-free wealth transfer to heirs through step-up in basis.

    • Continuous compounding of your investments.

    • No interruption to your investment strategy.

  • Imagine you buy $1 million worth of stock that grows to $5 million over 30 years.

    • Instead of selling and paying taxes on $4 million of gains, you borrow $2 million against the portfolio as needed.

    • Upon your death, your heirs receive the $5 million portfolio with a stepped-up basis — and no tax on the $4 million of gains.

    • The borrowed $2 million is simply repaid from the estate if necessary, but far less costly than paying taxes every time you sell.

Why Writing Off Margin Interest Can Be More Powerful Than Buy, Borrow, Die.

Keep control. Stay flexible. Maximize deductions.

While the Buy, Borrow, Die strategy has its appeal for long-term estate planning, it often sacrifices flexibility, active management, and real tax advantages along the way. Below is a comparison of how it stacks up against a margin-based approach that allows for smarter decision-making and real-time tax deductions.

Let’s Build Your Portfolio Together.

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