The Canada Revenue Agency confirmed the prescribed interest rate for the fourth quarter of 2026 will remain at 3%, effective Oct. 1 through Dec. 31. It is the sixth consecutive quarter at this level, calculated from the average three-month Government of Canada Treasury Bill yield in July, which came in at 2.29% and rounded up to the nearest whole percentage point under the Income Tax Regulations.
The rate has not held this low for this long since before the 2022 through 2024 tightening cycle, when it climbed as high as 6% through the first half of 2024 before stepping back down through 2025. That six-quarter history matters more than the current number does, because of how the prescribed rate loan strategy actually works.
The rate fell in stages from 6% in early 2024 to 3% by the third quarter of 2025 and has held there for six consecutive quarters. Source: Canada Revenue Agency quarterly prescribed rate announcements.
The Rate Locks at Inception, Not at Renewal
A prescribed rate loan is a straightforward income-splitting structure. The higher-income spouse, or a family trust, lends money to a lower-income spouse, an adult child, or a trust beneficiary at the CRA prescribed rate in effect when the loan is made. The borrower invests the funds and pays tax on the resulting investment income at their own, lower rate, provided the interest on the loan is actually paid every year.
The rate that matters is the one in effect when the loan documentation is signed and the funds move, not whatever the prescribed rate happens to be later. Once a loan is in place at 3%, it stays at 3% for as long as the loan exists, even if CRA raises the prescribed rate to 4% or higher in a future quarter. Six consecutive quarters at the current level does not mean six more are coming.
Who This Actually Affects
Direct spousal loans and loans to a family trust holding assets for adult children are the most common structure among individual clients splitting investment income within a household. Corporate owner-manager clients can use the identical mechanic through a shareholder loan from a CCPC to a lower-income spouse or adult child, which shifts investment income out of the corporation's hands without triggering a taxable benefit, provided the same annual interest requirement is met.
The distinction matters for segmentation. A retired couple with a meaningful non-registered portfolio and one spouse in a materially lower bracket is a straightforward direct-loan case. An incorporated business owner with retained earnings inside the company and a spouse or adult child with little other income is a shareholder-loan case, and often the more valuable conversation, since it can also reduce the passive income sitting inside the CCPC.
The Deadline That Makes or Breaks the Strategy
The interest owing for each calendar year must be paid no later than Jan. 30 of the following year. Missing that deadline attributes the investment income back to the lender, permanently, for that year and every year afterward, not only the year the payment was missed. This is the single most common way the strategy fails in practice, and it fails quietly: nothing about a missed payment triggers an immediate notice, it simply shows up as an unwelcome surprise on the lender's next tax return.
Clients already running this strategy need the January reminder calendared now, not in December. Clients who have discussed setting one up but have not signed anything have a closing, specific window: the rate available this quarter may not be the rate available next year.