Prescribed interest rates: fourth quarter 2026

The Canada Revenue Agency sets prescribed interest rates every quarter. The rates below apply from October 1 to December 31, 2026.

The prescribed rate has now stayed at 3% for six quarters in a row. It is based on the average yield of three-month Government of Canada Treasury bills in the first month of the preceding quarter, rounded up to the next whole percentage point.

Why it matters

• Family loans: a loan to a spouse or family trust at the prescribed rate in effect when the loan is made keeps that rate for the life of the loan, provided interest is paid by January 30 each year.
• Shareholder and employee loans: the 3% rate is used to calculate the taxable benefit on interest-free or low-interest loans.
• Balances owing: overdue tax accrues interest at 7%, compounded daily.

Planning considerations

Prescribed-rate loans can provide income-splitting opportunities for families, particularly where investment returns are expected to exceed the prescribed interest rate. However, the decision should take into account the anticipated investment returns, financing arrangements, administrative requirements, and the potential application of attribution rules.

For existing prescribed-rate loans, a subsequent reduction in interest rates does not automatically justify refinancing. Repaying and replacing an existing loan requires careful consideration of the applicable tax rules, including whether the original borrowing has been genuinely repaid and whether a new arrangement could trigger attribution.

Maintaining appropriate documentation and ensuring that annual interest payments are made on time are essential to preserving the intended tax benefits.