The prescribed rate for family income-splitting loans holds at 3% for the fourth quarter of 2026, the sixth consecutive quarter at that level. The CRA also confirmed the rate it charges on overdue taxes stays at 7%. Neither number moved this week. What changed is the case for assuming they stay there.
Why This Quarter Is Different From the Last Five
The prescribed rate is not set at the CRA’s discretion. It is the average yield on 90-day Government of Canada Treasury bills from the first month of the preceding quarter, rounded up to the next whole percentage point. It has sat at 3% since the third quarter of 2025 because short-term yields have stayed low enough to keep rounding there.
Two developments this week put that mechanism under pressure. Canada’s retaliatory tariffs on $27.6 billion of American goods took effect September 8, with duties as high as 50% on steel, aluminum and a range of consumer categories. Two days earlier, the Bank of Canada held its policy rate at 2.25% for a seventh straight decision, but paired the hold with an explicit warning: tariff-driven costs and elevated oil prices are raising the risk that inflation moves higher rather than settling near the 2% target, and the Bank is prepared to raise rates again if that spreads into everyday prices.
The Mechanical Link From Tariffs to the Prescribed Rate
A Bank of Canada rate increase at the October 28 decision would lift short-term Treasury bill yields, which is precisely the input the prescribed rate is built from. A loan set up under the current 3% rate keeps that rate for its full life, provided interest is paid annually by January 30 of the following year. A loan set up after the rate resets higher does not get the benefit retroactively.
For clients with a spouse or adult child in a materially lower tax bracket, that difference compounds. On a $500,000 loan, the gap between a 3% and a 4% prescribed rate is $5,000 a year in interest the lower-income borrower must pay the lender to preserve the income-splitting benefit, which changes the after-tax return math on the strategy.
The prescribed rate’s path since mid-2022 shows how quickly it moved once the Bank of Canada’s rate cycle turned, climbing from 2% to 6% across seven quarters before this year’s decline back to 3%, and it is the same 90-day Treasury bill mechanism that could reverse that decline if the Bank hikes again this quarter.
The prescribed rate climbed from 2% to a peak of 6% across the 2022 to 2024 tightening cycle before falling back to 3%, where it has held for six consecutive quarters. The Bank of Canada’s next rate decision, October 28, falls inside the current quarter.
What This Changes for the Planning Conversation
This is not a case for urgency built on a rate that has already moved. It has not. It is a case for urgency built on the specific, named mechanism that could move it: two more months of tariff and oil-driven inflation data landing before the Bank’s October 28 decision, in a quarter where the Bank itself has said the risks run one direction.
Corporate taxpayers face a separate but related deadline. The CRA’s pertinent loan or indebtedness rate for cross-border corporate lending, distinct from the family loan rate, is set at 6.29% for the fourth quarter, its own quarterly reset tied to the same Treasury bill mechanism and worth flagging for incorporated clients with intercompany loan structures.