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 July 3, 2026 · LendRight Editorial Team · a RULE8 Inc. product
Four numbers govern interest on family loans in Canada: 35% APR is the criminal ceiling, the rate must be stated per annum to be fully collectable, any interest you receive is taxable income, and the CRA prescribed rate (3% in 2026) is the benchmark for spousal income-splitting loans. Charging 0% is completely lawful and the most common choice.
35% APR is the ceiling: the Criminal Code makes it an offence to charge an effective annual rate at or above it, family or not. 3% is the floor that matters for tax planning: the CRA prescribed rate for 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.
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 with an effective annual rate below 35% APR — the federal criminal threshold applies to every lender in Canada, related or not. 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 2026. 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.