It’s official: The prescribed rate on loans to family members will remain at 3% in the first quarter of 2026, while the interest rate Canadians must pay on overdue tax will stay at 7%.
The Canada Revenue Agency (CRA) published on Wednesday the prescribed annual interest rates for amounts owed to or by the agency for the period from Jan. 1 to March 31.
The latest announcement keeps the prescribed rate steady for the third quarter in a row.
The prescribed rate was 4% through the first half of 2025. Before the third quarter of 2025, the prescribed rate hadn’t been as low as 3% since the final quarter of 2022.
The prescribed rate began rising in the third quarter of 2022; up until then, the rate had been 1% for two years, with the rate charged on overdue tax at 5%. The prescribed rate hit 6% in the first half of 2024 before beginning to drop.
The rate the CRA charges on overdue tax, Canada Pension Plan contributions and employment insurance premiums is always four percentage points higher than the prescribed rate.
The prescribed rate is based on the average of three-month Treasury bills for the first month of the preceding quarter, rounded up to the next highest percentage point.
Prescribed-rate loans are often used for income splitting with a spouse, common-law partner or other family members. A loan can be made directly to an individual or to a family trust, which can then distribute income to members in lower tax brackets. The lower the prescribed rate, the greater the tax-planning opportunity.
Other key CRA announcements for Q1 2026 include:
- the rate to be paid on corporate taxpayer overpayments will be 3%;
- the rate to be paid on non-corporate taxpayer overpayments will be 5%;
- the rate used to calculate taxable benefits for employees and shareholders from interest‑free and low-interest loans will be 3%; and
- the rate for corporate taxpayers’ pertinent loans or indebtedness will be 6.36%, down from 6.69% in Q4.