Lock in Prescribe Rate Loans by June 30, 2022

High income individuals can split income with their spouse/common-law partner or children (either directly or through a trust) using prescribed rate loans. The current prescribed rate of interest is 1% until June 30, 2022 and will double to 2% on July 1, 2022. Establishing the loan by June 30, 2022 ensures that the 1% rate will apply for the duration of the loan even though the prescribed rate will increase to 2% on July 1, 2022. This planning is beneficial with low income spouses, children that have no income and children in university with tuition tax credits available. Generally, this strategy is only beneficial when investment returns exceed 1%. 

Calendar year interest must be paid by January 30th of the following year to avoid income attributing back to the lender for all years.


Mr. A lends his spouse $300,000 when the prescribed rate is 1%. The rate of return for Mr. A is 5%. Mr. A is taxed at a marginal rate of 54% and Mrs. A is taxed at a marginal rate of 20%. Mrs. A pays Mr. A $3,000 of interest on the $300,000 loan by January 30th.


  • Mr. A will include $3,000 of interest in his income and pay $1,620 in tax
  • Mrs. A will include $12,000 in her income (net of the $3,000 interest deduction) and pay $2,400 in tax
  • If Mr. A had earned the 5% return directly, his tax bill would be $8,100
  • Tax savings of $4,080 are realized from prescribed loan planning

The information in this article is of a general nature and is in summary form. Contact one of our tax professionals to discuss these matters in the context of your situation before acting upon such information.

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