The Canada Revenue Agency confirmed the prescribed rate will remain at 3 percent for the third quarter of 2026, running from July 1 through September 30. This is the fifth consecutive quarter at 3 percent, the longest the rate has held steady since the two year stretch at 1 percent that ended in the third quarter of 2022.
The rate is calculated from the average yield on three month Government of Canada Treasury bills during the first month of the preceding quarter, rounded up to the next whole percentage point. It peaked at 6 percent through the first half of 2024, stepped down to 5 percent for the second half of that year, to 4 percent through the first half of 2025, and has sat at 3 percent since the third quarter of 2025.
Why the Stability Itself Is the Planning Signal
Prescribed rate loans let a higher income spouse, common-law partner, or family member lend money to a lower income family member, or to a family trust for the benefit of minor children, at the CRA prescribed rate. The borrower invests the funds and reports the investment income. The lender reports the interest received. Because the loan is taxed at the prescribed rate rather than the lender's marginal rate, any investment return above the prescribed rate is effectively split into the lower bracket.
Once a loan is put in place at a given quarter's rate, that rate is locked for the life of the loan regardless of what the prescribed rate does afterward. Five quarters of stability at 3 percent means a family that acts today locks in the same rate a family that acted a year ago received, without needing to time a rate trough that may or may not have already happened.
The prescribed rate's path from a 6 percent peak to a flat 3 percent line over the past two and a half years shows exactly how much of the current income splitting opportunity is a function of stability rather than a fresh low.
The prescribed rate stepped down from a 6 percent peak in early 2024 to 3 percent by the third quarter of 2025 and has not moved since, the longest stable stretch since the 1 percent era ended in 2022.
The Spread That Still Makes the Math Work
The Government of Canada five year bond yield closed at 3.03 percent on July 6, having eased three basis points from the prior session according to Trading Economics. A prescribed rate loan invested in a diversified fixed income portfolio yielding in that range, or in equities with a higher expected return, still splits meaningfully more income into the lower bracket than a loan made when the prescribed rate sat at 4 percent or 6 percent. The lower the prescribed rate relative to what the borrowed funds can earn, the larger the spread available for splitting.
This strategy operates entirely outside registered accounts. RRSP and TFSA contribution room cannot be transferred between spouses through a prescribed rate loan, and a loan to fund a TFSA or RRSP contribution does not achieve income splitting because those accounts are already tax sheltered or tax deferred on their own terms. The prescribed rate loan strategy is specifically a non-registered account tool, most relevant for household investment income that would otherwise be taxed in the higher earning spouse's hands, or for funding a minor's private school or extracurricular costs through a family trust.
The Deadline That Determines Whether Any of This Works
The interest on the loan must actually be paid, not accrued or added to the loan balance, by January 30 of the year following the year in which it was charged. For a loan made in 2026, that means interest must be paid on or before January 30, 2027. Missing that deadline in any year causes the attribution rules to apply retroactively to that year and permanently going forward, meaning all future investment income on the loaned funds reverts to being taxed in the lender's hands. The only remedy at that point is to establish an entirely new loan at whatever the prescribed rate happens to be when the new loan begins, which may no longer be 3 percent.
The Corporate Rate Moved the Other Way
The rate for corporate taxpayers' pertinent loans or indebtedness, which applies to Canadian controlled private corporations with loans to or from non-resident affiliates, rose to 6.3 percent for the third quarter, up from 6.2 percent in the second quarter. This is the first increase in that rate in more than a year and is a distinct calculation from the family income splitting rate. Business owner clients with CCPC structures involving cross border shareholder loans should have this incremental cost flagged before any quarterly loan renewal or restructuring decision.