The CRA's prescribed rate stays at 3% for Q4 — the spousal loan math, honestly

On August 28 the CRA published its interest rates for October 1 to December 31, 2026. The one most people notice is the 7% charged on overdue tax and missed instalments — unchanged. The one worth a second look is the prescribed rate on family loans: 3%, also unchanged, for the sixth consecutive quarter.

That number sets the price of one of the few income-splitting strategies the CRA explicitly permits between spouses.

The problem a spousal loan solves

Canada taxes investment income to whoever supplied the money. If the higher earner in a couple simply hands $200,000 to the lower earner to invest, the attribution rules send the interest and dividends right back to the higher earner's return. No tax saved.

The exception: a documented loan at the CRA's prescribed rate (or higher), with interest actually paid every year. Do that, and the investment income is taxed in the borrower's hands — at their lower rate.

The rate is locked in at the time the loan is made. A 3% loan signed this quarter stays a 3% loan for its whole life, even if the prescribed rate rises later.

What it saves — a worked example

Ontario couple, 2026. One spouse earns $130,000 (marginal rate about 37%); the other earns $30,000 (marginal rate about 19%). The higher earner lends $200,000 at 3%, and the lower earner invests it in a portfolio returning 5%, or $10,000 a year.

Without the loan — the higher earner invests it themselves:

• $10,000 of income at ~37% → about $3,716 in tax.

With the loan:

• The borrower reports $10,000 of income, deducts the $6,000 of interest paid, and is taxed on $4,000 at ~19% → about $762.
• The lender reports the $6,000 of interest as income at ~37% → about $2,230.
• Total: roughly $2,992, a saving of about $720 a year.

Not life-changing on $200,000. The strategy scales with three things: the size of the loan, the gap in marginal rates, and the spread between the portfolio return and 3%. On $500,000 with the same spread, the saving is closer to $1,800 a year; if returns run at 7% instead of 5%, it roughly doubles again. Check your own two marginal rates with the take-home pay calculator before deciding whether the paperwork is worth it.

The rule that breaks it: January 30

Interest for each calendar year must be paid by January 30 of the following year. Miss it once — even by a day — and attribution applies for that year and every year after. There's no fixing it; you'd have to repay the loan and start over.

Practical setup:

• A written loan agreement stating the amount, the 3% rate, and the repayment terms.
• Money moved from the lender's account to the borrower's own account, then invested in the borrower's name.
• A calendar reminder for January 30 and a visible transfer of the interest from borrower to lender. Keep the records.
• The lender reports the interest on their return every year; the borrower deducts it.

Who this is and isn't for

It works best for couples with a large income gap and non-registered money already sitting in the higher earner's name. If your investable savings still fit inside TFSAs and RRSPs, fill those first — a TFSA is a better income-splitting tool than any loan, and it needs no paperwork.

It also isn't a retirement-income tool. Once you're drawing a pension or RRIF, pension income splitting moves up to half of eligible income to a spouse with no loan at all.

The takeaway

A 3% prescribed rate held for six quarters is an unusually long window. The strategy isn't magic — on $200,000 it's a few hundred dollars a year — but it's legal, repeatable, and the rate locks in for the life of the loan. If you're going to do it, the quarter you sign matters less than the January 30 you can't miss.

Marginal-rate estimates delivered by Metrestick. Underlying data: CRA 2026 federal & provincial income-tax parameters (Open Government Licence – Canada), 2026 tax year. Prescribed rates: CRA, Interest rates for the fourth calendar quarter, 2026.