CRA Prescribed Rate 3% Q4 2026: Family Loans Guide

» Quick Answer: The Q4 2026 Prescribed Rate at a Glance

» Why the Rate Holding at 3% Matters Right Now

The Canada Revenue Agency has confirmed that the prescribed interest rate stays at 3% from October 1 to December 31, 2026. That is the sixth quarter in a row at the same level, and it matters more than most headlines suggest.

For Ontario families and incorporated professionals, a stable prescribed rate is a planning window. Prescribed-rate loans, employee loan calculations, and shareholder loan strategies all key off this number. When the rate is low and steady, decisions you make now can lock in tax outcomes for years.

What follows is a plain-English guide to what the rate is and the moves worth making before year-end. If you already have a prescribed-rate loan in place, we will also flag the January 30 deadline that quietly ends more of these arrangements than any CRA audit does. For broader context, see ClearWealth Insights.

» Quick Start: Pick Your Path

» What the Prescribed Rate Actually Is (And the Three Related Rates)

The prescribed rate is a quarterly interest rate the CRA sets under section 4301 of the Income Tax Regulations. It is calculated as the simple average of yields on three-month Government of Canada Treasury bills for the first month of the preceding quarter, rounded up to the next whole percentage point. For Q4 2026, the calculation was based on July 2026 T-bill yields.

Although people speak of “the” prescribed rate, that single figure drives four separate CRA numbers in Q4 2026. The base rate of 3% applies to family loans made under prescribed-rate loan arrangements, taxable benefit calculations on interest-free or low-interest employee and shareholder loans, and refund interest the CRA pays to non-corporate taxpayers on overpayments.

The rate the CRA charges on overdue income tax, CPP contributions, and EI premiums is always four percentage points higher than the base rate, so it sits at 7% for Q4 2026. Corporations receive interest at the base rate plus two percentage points on overpayments, which works out to 5%. Finally, a separate corporate rate of 6.29% applies to what the CRA calls pertinent loans or indebtedness under section 17.1 of the Income Tax Act, used mainly in cross-border and inter-corporate lending. For the underlying legislative context, see federal tax basics.

» Prescribed-Rate Loan vs No-Loan Attribution: Side-by-Side

The point of a prescribed-rate loan is to move investment income from a higher-income spouse to a lower-income spouse without running into the attribution rules in section 74.1 of the Income Tax Act. A properly documented loan at the prescribed rate is one of the few exceptions.

Consider a household where one spouse has $200,000 to invest and sits in Ontario’s top bracket while the other spouse works part-time in a lower bracket. If the higher earner simply gifts the money, the investment income is attributed back and taxed at the higher rate. If the higher earner instead lends the $200,000 under a written promissory note at 3%, the investment income is generally taxed in the lower earner’s hands.

The table below shows the shape of the tax difference on a hypothetical $10,000 of taxable investment income. Actual savings depend on both spouses’ full tax situations and current 2026 Ontario tax brackets.

Figures are illustrative only. Household savings vary with income mix, other credits, and OAS clawback exposure.

» Step-by-Step: Setting Up a Prescribed-Rate Loan Before Year-End

The rate you lock in on the day funds are advanced is the rate you use for as long as the loan is outstanding, even if the CRA raises the prescribed rate later. That is why a stable, low rate is a planning opportunity.

1. 1
   Draft a written promissory note.The note names the lender, the borrower, the principal, the 3% rate, and the January 30 annual interest payment date. Both spouses sign and keep a copy with tax records.
2. 2
   Confirm the rate on the loan date.The applicable rate is the one in effect the day funds are advanced. Advancing between October 1 and December 31, 2026 locks in 3%.
3. 3
   Actually transfer the money.Move funds from the lender’s account to the borrower’s account. A paper trail matters if the arrangement is ever reviewed.
4. 4
   Invest in the borrower’s own name.The borrower uses an investment account in their sole name and buys income-producing investments with the proceeds.
5. 5
   Track interest owed each year.Interest for the calendar year is 3% of the outstanding principal.
6. 6
   Pay interest by January 30.The borrower pays the calculated interest to the lender in cash by January 30 of the following year. Interest paid a day late permanently voids attribution protection for the loan. Fit this into your wider plan with our core tax-saving strategies.

» Employer and Shareholder Loans: What the 3% Rate Means for T4s and Corporations

The 3% prescribed rate does not only affect families. Section 80.4 of the Income Tax Act uses the same rate to calculate the taxable benefit an employee or shareholder receives when they borrow money from their employer or corporation at less than the prescribed rate. If a corporation lends a shareholder $100,000 interest-free for a full quarter, the CRA generally treats the shareholder as having received a taxable benefit equal to 3% of the outstanding balance for that period.

For interest-free or below-market employee loans, the employer must include the imputed interest benefit on the employee’s T4 in Box 14 (employment income) and often report it separately in Box 40 (other taxable allowances and benefits). Employees can reduce the benefit by paying actual interest to the employer at any rate up to the prescribed rate before January 30 of the following year.

Corporations that lend to related non-resident entities work with a separate rate. The Q4 2026 pertinent loans or indebtedness rate is 6.29%, down slightly from 6.30% in Q3. This rate governs certain cross-border and inter-corporate loans under section 17.1 of the Income Tax Act. If you use a holding company structure, review holding company tax planning to see how these rates interact with your corporate group.

» Common Mistakes Ontario Families and Owner-Managers Make

These are the traps we see most often when Ontario clients bring us a prescribed-rate loan or shareholder loan arrangement for review.

• →Assuming the rate resets each quarter. The rate is set at loan advance and stays fixed for the life of the loan, even if the CRA lowers it in a future quarter.
• →Skipping the promissory note. Verbal arrangements between spouses are not enough. Without a signed note dated at advance, attribution rules generally apply.
• →Missing the January 30 interest payment. Interest paid after that date permanently voids the loan’s attribution protection for its entire remaining life, not just the year missed.
• →Paying interest by journal entry only. The CRA looks for actual cash movement between the borrower’s and lender’s accounts, especially on family loans.
• →Confusing the 3% loan rate with the 7% overdue tax rate. These are two different rates driven by the same formula and easy to mix up when reading CRA correspondence. See CRA installment deadlines for how the overdue rate compounds.
• →Investing loan proceeds in a joint account. The borrower must invest in their own name only. A joint account can trigger partial attribution back to the lender spouse.
• →Forgetting to report both sides of the interest. The borrower deducts the interest paid; the lender must include the interest received as income on their T1.

» Frequently Asked Questions

Sources & References

1. Canada Revenue Agency — Interest rates for the fourth calendar quarter (2026) — https://www.canada.ca/en/revenue-agency/services/tax/prescribed-interest-rates/2026-q4.html
2. Department of Finance Canada — Canada Revenue Agency Rates (T-bill methodology) — https://www.canada.ca/en/department-finance/services/lending-rates/revenue-canada-rates.html
3. Income Tax Regulations, Section 4301 — Prescribed rate of interest — https://laws-lois.justice.gc.ca/eng/regulations/c.r.c.,_c._945/section-4301.html
4. Income Tax Act, Section 74.1 — Attribution of income between spouses — https://laws-lois.justice.gc.ca/eng/acts/i-3.3/section-74.1.html
5. Income Tax Act, Section 80.4 — Interest benefit on employee and shareholder loans — https://laws-lois.justice.gc.ca/eng/acts/i-3.3/section-80.4.html
6. Income Tax Act, Section 17.1 — Pertinent loans or indebtedness — https://laws-lois.justice.gc.ca/eng/acts/i-3.3/section-17.1.html
7. Canada Revenue Agency — Canadian income tax rates for individuals — https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/canadian-income-tax-rates-individuals-current-previous-years.html