Prescribed rate loan planning

April 28, 2020 | RBC Wealth Management Services


“For some families, there may be opportunities to reduce taxes by setting up a prescribed rate loan.”

Prescribed rate loan planning


Did you know, your family can save on taxes by having a high-income family member loan cash at the current CRA prescribed interest rate — to a lower-income family member?

Any investment income earned by the low-income family member, exceeding the prescribed rate, is then taxed in their name.

For example, a high-income spouse can loan cash directly to a low-income spouse.

Or, a high-income parent can loan cash to a family trust to income split with their children.

The investment income earned in the trust can be used to fund child-related expenses, such as private school fees, lessons, or other expenses that directly benefit the child.

Speak to a qualified tax advisor to determine if prescribed rate loan planning is right for you.


Personal finance Tax