The CRA prescribed rate for family loans is 3% for every quarter of 2026, including October–December. For income-splitting loans — typically between spouses — charging at least the prescribed rate when the loan is made keeps the investment income taxed in the borrower's hands, and that rate stays locked for the life of the loan even if the CRA's rate later rises. The interest must actually be paid by January 30 each year.
If you've heard that you can "lend money to your spouse to save tax," this is the rule that makes it real — and the deadline that quietly destroys it for people who get the timing wrong. The CRA prescribed rate is 3% for 2026, and a properly run prescribed-rate loan can shift investment income into a lower tax bracket. Here's exactly how it works, the date you cannot miss, and why none of it functions without a written agreement.
The CRA prescribed rate for loans to family members is 3% for 2026 — unchanged since mid-2025. If you lend to a lower-income spouse or child at that rate so they can invest, the investment income is taxed in their hands, not yours. That's the entire idea, and three details make or break it.
The 2026 rate
The prescribed rate has been 3% every quarter from July 2025 through December 2026, which covers all of 2026 — including the current quarter, October to December (Q4). The Canada Revenue Agency resets it every quarter using a formula tied to the average yield on three-month Government of Canada Treasury bills in the first month of the preceding quarter, rounded up to the next whole percentage point. Because the result is rounded up, it has never gone below 1%. For context, it sat at 1% from mid-2020 to mid-2022, peaked at 6% in the first half of 2024, and has eased back since.
What that means for you right now: a prescribed-rate loan made by December 31, 2026 locks in 3%. The rate for January–March 2027 hasn't been announced yet. The CRA posts each new rate ahead of the quarter (the October–December rate appeared in late August), so check its prescribed-rate page before you set up a loan in the new year.
Source: CRA quarterly prescribed interest rates; rate confirmed at 3% for all four quarters of 2026 (Q1–Q4).
What the prescribed rate is actually for
It's the engine of a classic income-splitting strategy. Canada taxes income progressively, so shifting investment income from a high earner to a low earner lowers the family's combined tax. You can't simply give your spouse money to invest — the attribution rules in the Income Tax Act tax that income back to you. But there's an exception: if you lend the money at no less than the prescribed rate and follow the rules, the income legitimately belongs to the borrower. A common version: a higher-earning spouse lends to a lower-earning spouse, who invests in a non-registered account; the returns above 3% are taxed in the lower bracket.
The rate locks in for the life of the loan
Here's why timing matters. Whatever prescribed rate is in effect when you make the loan applies for as long as the loan exists — it doesn't float up with future quarters. Set up a prescribed-rate loan today at 3%, and 3% is your rate even if the figure rises to 4% or 5% later. That's what makes a relatively low-rate window attractive: you're locking in the borrower's hurdle. The strategy produces savings whenever the investments earn more than the locked rate.
The deadline that kills the strategy
The interest for each calendar year must be paid by the borrower to the lender no later than January 30 of the following year — not January 31. Miss it, even once, and the attribution rules apply: the investment income is taxed back in the lender's hands, and the arrangement is effectively broken going forward. This single date is where most do-it-yourself prescribed-rate loans fall apart. Put a recurring reminder in place and treat the payment as non-negotiable.
Both sides of the tax entry
Don't forget the mirror image: the interest the borrower pays is taxable income to the lender, who reports it. The borrower, in turn, can generally deduct that interest because the money was borrowed to earn investment income. Netted out across two brackets, the family still comes out ahead when investment returns beat the prescribed rate — but both the income inclusion and the deduction have to be reported. This is genuine tax filing, not a handshake.
You still need a real loan agreement
A prescribed-rate loan only works if it's a bona fide loan, and you have to be able to show that. The Income Tax Act doesn't prescribe a form, but in practice that means putting it in writing: the principal, the rate, and the repayment terms. And pay the interest in real money, because a promissory note for the interest doesn't count as payment. Without a written record, the arrangement looks like a gift, attribution applies, and the planning collapses. The tax strategy and the paperwork aren't separate steps; the paperwork is the strategy's foundation.
The agreement the strategy depends on
LendRight builds the written loan agreement a prescribed-rate arrangement requires — principal, rate, and terms recorded and e-signed by both people in minutes. Free to draft.
Create my loan agreement →Common questions
What is the CRA prescribed rate for family loans in 2026?
It's 3% for all of 2026, including October–December (Q4), and it has held at 3% every quarter since July 2025. The CRA sets it quarterly from the average yield on three-month Government of Canada Treasury bills, rounded up to the next whole percentage point, so it has never gone below 1%. The January–March 2027 rate hasn't been announced yet.
What is a prescribed-rate loan used for?
Income splitting. A higher-income person lends money to a lower-income spouse, partner, or child (or to a family trust) at the prescribed rate. The borrower invests it, and the investment income is taxed in their lower-bracket hands instead of the lender's. Done correctly, the family's overall tax bill falls.
Why is January 30 such an important date?
Because the borrower must actually pay the interest for each year to the lender by January 30 of the following year. Miss that deadline even once and the attribution rules apply for that year and going forward — the investment income gets taxed back in the lender's hands, defeating the whole strategy. It's January 30, not January 31.
Does the rate change if rates rise after I set up the loan?
No — and that's the point. The prescribed rate is locked in at the rate in effect when the loan is made, for the life of the loan. Setting one up while the rate is 3% locks in 3% even if future quarters climb higher, which is what makes a low-rate environment attractive for this planning.
What rate will apply if I make the loan in 2027?
Whatever the CRA sets for the quarter the loan is made in. The January–March 2027 rate hasn't been published yet, so if you want to be certain of locking in 3%, make the loan — sign the agreement and advance the money — by December 31, 2026. Either way, the rate you start with stays fixed for the life of the loan.
General information for Canada, not tax or legal advice; LendRight is not a law firm or an accounting firm. Prescribed-rate planning is fact-specific and the rate changes quarterly — confirm the current rate and consult a tax professional before acting. The attribution rules and reporting requirements are set out in the Income Tax Act.
We write plain-language guides on lending between family and friends in Canada, reviewed against current provincial and CRA rules. LendRight is not a law firm — this is general information, not legal advice.