The Federal Open Market Committee announces its rate decision at 2 p.m. ET Wednesday, with markets pricing roughly a one in three chance Chair Kevin Warsh delivers the first US rate hike since the Iran war began pushing oil prices around. Whatever happens in Washington this afternoon, the number that actually governs the most common family income splitting strategy in Canada was fixed months ago and is not on today's agenda.
The Canada Revenue Agency's prescribed rate, the rate that determines how much interest a spouse or family member must charge on a loan used to split investment income, holds at 3% for the third quarter of 2026. That is the fifth consecutive quarter at 3%, confirmed in the CRA's announcement covering July 1 through September 30.
The Number That Didn't Move
The prescribed rate is calculated under section 4301 of the Income Tax Regulations from the average yield on three month Government of Canada Treasury bills auctioned in the first month of the preceding quarter, rounded up to the next whole percentage point. The rate for July through September was set from April auctions, where three month T-bills yielded 2.32% on April 7 and 2.29% on April 21, an average of 2.305% that rounds up to 3%.
The rate has not been below 3% since the third quarter of 2025, and it was as high as 6% in the first half of 2024. The lower the prescribed rate sits, the more attractive a prescribed rate loan becomes for splitting investment income with a spouse, common law partner, or family trust, since the lending family member only needs to earn a return above 3% for the arrangement to shift taxable income into a lower bracket.
Why Canada's Short End Is Different From Washington's
Canada's three month Treasury bill yield sat at 2.25% as of July 15, according to the Bank of Canada, essentially where it has traded since the central bank's sixth consecutive hold that same day. That is the same window that will determine the fourth quarter prescribed rate, and nothing in the current trajectory suggests Canadian short term yields are approaching the roughly 3% threshold that would push the rate to 4% in October.
That stability is a direct consequence of the Bank of Canada's own calendar. Governor Tiff Macklem held the overnight rate at 2.25% on July 15 for a sixth straight decision and will not announce another until September 2, more than five weeks after today's Fed outcome. Canada's 10 year bond yield has moved on spillover from US Treasuries and oil driven inflation concern, easing to about 3.60% after touching a two month high near 3.66% in the past week, but the short end that actually sets the prescribed rate has stayed anchored to a central bank that has already told the market it is not moving until September.
Lined up against each other, the rates that actually touch a Canadian income splitting or estate plan look considerably calmer than the ones dominating today's headlines.
The dashed line marks 3.00%, the rounding threshold a Q4 average Treasury bill yield would need to clear for the prescribed rate to rise to 4% in October. US Fed funds is shown at its target range midpoint pending this afternoon's decision.
The One CRA Rate That Actually Rose
Not every CRA number is frozen. The rate used to calculate a corporate taxpayer's pertinent loan or indebtedness, relevant to Canadian controlled private corporations with cross border loans to or from a foreign affiliate, rose to 6.30% for the third quarter from 6.20% in the first quarter, the CRA confirmed. That rate follows a different calculation than the personal prescribed rate and moves independently, so a business owner client with an intercompany loan structure needs a separate conversation from a client using a straightforward spousal loan.
The Planning Bridge
A prescribed rate loan locks in at the rate in effect when the loan is made and stays locked for the life of the loan, provided interest is paid to the lending family member by January 30 of the following year. Miss that deadline and the investment income earned on the loan is attributed back to the lender for that year and every year after. With the rate stable at 3% through September and unlikely to rise in October based on current Treasury bill trends, a family considering an income splitting loan faces no real urgency created by today's Fed decision, and considerably more urgency created by the January 30 payment deadline on any loan already in place.