Tax Flash Bulletin
Income-Splitting Loans – Rate Increase
The Canada Revenue Agency has announced the current 3 per cent prescribed interest rate will increase to 4 per cent for new loans established after December 31, 2022. Canadian individuals interested in using income-splitting prescribed rate loans with their spouse should set up any new loan amounts before the rate increases on January 1, 2023. The original rate in effect at the execution date of previous loans can continue to apply to those loans.
Recent history of the prescribed interest rates:
| Applicable Period | Rate |
|---|---|
| January 1, 2023 to March 31, 2023 | 4% |
| October 1, 2022 to December 31, 2022 | 3% |
| July 1, 2022 to September 30, 2022 | 2% |
| July 1, 2020 to June 30, 2022 | 1% |
| April 1, 2018 to June 30, 2020 | 2% |
| January 1, 2014 to March 31, 2018 | 1% |
| October 1, 2013 to December 31, 2013 | 2% |
| April 1, 2009 to September 30, 2013 | 1% |
Couples use the prescribed rate loan strategy to shift taxable investment income to the spouse with the lower taxable income in order to reduce the couple’s overall income taxes. Investors interested in this strategy should speak with their tax accountant, legal professional, and financial advisor to set up a new loan for this purpose.
This has been prepared by the Professional Wealth Advisory Group of Raymond James Ltd., (RJL). Statistics and factual data and other information are from sources RJL believes to be reliable but their accuracy cannot be guaranteed. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities nor is it meant to replace legal, accounting, taxation or other professional advice. We are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters. The information is furnished on the basis and understanding that RJL is to be under no liability whatsoever in respect thereof. This is intended for distribution only in those jurisdictions where RJL and the author are registered. Securities-related products and services are offered through Raymond James Ltd., Member - Canadian Investor Protection Fund. Insurance products and services are offered through Raymond James Financial Planning Ltd., which is not a Member - Canadian Investor Protection Fund.