Family lenders keep asking the same four questions — can I charge interest, how much, is it taxed, and what’s this prescribed rate everyone mentions? This hub holds the answers and the deep-dives behind them.
Curated & reviewed September 30, 2026 · LendRight Editorial Team · a RULE8 Inc. product
Three numbers govern interest on family loans in Canada: 35% APR is the criminal ceiling, the CRA prescribed rate (3% for all of 2026) is the benchmark for spousal income-splitting loans, and 0% — interest-free — is completely lawful and the most common choice. Alongside them, state any rate per annum so it's fully collectable, and report interest you receive as taxable income.
35% APR is the ceiling: the Criminal Code makes it an offence to charge an annual percentage rate above 35%, family or not. 3% is the floor that matters for tax planning: the CRA prescribed rate for every quarter of 2026, the benchmark for spousal loans and other attribution-sensitive arrangements. And 0% is the most popular number of all — interest-free is completely lawful between family members, and it’s what most parents and siblings choose.
Between those numbers sits one obligation lenders forget: interest you receive is taxable income. A 3% loan to a sibling produces a T-slip-less income stream you’re expected to report. The guides below take each rule in depth.
The short version is that lending itself is not a taxable event. Money you hand to a relative under a genuine loan is not income to them and not a deduction for you. What the Canada Revenue Agency cares about begins the moment interest enters the picture, and it runs in one direction: interest you receive is interest income, reportable in the year you receive it, whether or not the borrower issues you a slip.
Three consequences follow. First, a zero-interest family loan creates no tax to report — it is the simplest arrangement there is. Second, if you do charge interest, the arrangement should be written down, because the CRA treats a documented loan very differently from an undocumented transfer that later looks like a gift. Third, if you are lending to a spouse or a family trust to split investment income, the loan must carry at least the CRA prescribed rate and the interest must actually be paid by 30 January each year, or attribution rules pull the income straight back to you.
The tax implications of lending to a family member in Canada are, in other words, mostly about paperwork rather than payment. The rules below set out each number in turn.
Set the rate in a signed agreement
Zero, 3%, or anything lawful — what matters is writing it down.
Create a loan agreement — free →Lending is not itself taxable and the money is not income to the borrower. The tax implications start with interest: any interest you receive is interest income and must be reported. An interest-free family loan creates nothing to report. Spousal and trust loans are the exception — they must carry at least the CRA prescribed rate, with interest paid by 30 January, or the income attributes back to you.
Anything up to 35% APR. Above that is a criminal rate for every lender in Canada, related or not, and fees and penalties count toward it. In practice, family loans cluster at 0% or around the CRA prescribed rate.
Yes. Interest you receive is income, reportable even though nobody issues you a slip. Interest-free loans avoid the issue entirely — one reason they're the family default.
3% for October–December 2026 (Q4), and it has been 3% every quarter since July 2025. The January–March 2027 rate hasn't been announced yet. It's set quarterly from Treasury bill yields, and for prescribed-rate loans (notably between spouses), the rate in force when the loan is made stays locked in for the loan's life.
Absolutely — there's no rule requiring interest between individuals, and no tax consequence to the borrower from an interest-free family loan in ordinary situations. The exception is attribution-sensitive planning (like spousal investment loans), where charging the prescribed rate is the whole point.
LendRight provides self-help document automation and general information, not legal or tax advice; no lawyer-client relationship is created. Court limits and rates change — verify with official sources. For complex situations, consult a licensed lawyer in your province.