Time to lock-in historic low rates
Lock-in prescribed rate loans at 1% and potentially save on overall family taxes. You may be able to save on your overall family taxes by splitting income with lower-income family members. One way to do this is by making loans to your lower-income family members for investment purposes and charging the Canada Revenue Agency (CRA) prescribed interest rate on the loan.
Currently, the CRA prescribed interest rate is at a historic low of 1% but it will be increasing to 2% for the quarter beginning April 1st, 2018. This means that it will become more expensive to implement this income splitting strategy. As the interest rate on a prescribed rate loan is locked-in for the life of the loan regardless of any future interest rate increases, now may be the time to consider setting up a new loan at 1%.
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What moved the markets
The release of the 2018 Federal Budget dominated Canadian headlines towards the end of the month, following a string of underwhelming economic releases. In the U.S., new Federal Reserve Chair Jerome Powell emphasized the emergence of positive economic data following a brief equity market correction and the sudden return of volatility.
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A rough ride back to normal
While volatility came roaring out of hibernation, the market correction is unlikely to alter the encouraging economic and earnings outlook. Look for the bull market to get back in gear later in the year.
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