CRA Prescribed Interest Rate 2026
The CRA prescribed interest rate is set quarterly and affects employee loans, shareholder loans, tax instalments, and income-splitting strategies.
2026 Quarterly Rates
| Quarter | Period | Prescribed Rate | Overdue Tax Rate | Refund Rate | Corporate Overpayment |
|---|---|---|---|---|---|
| Q1 2026 | Jan 1 – Mar 31 | 4% | 6% | 4% | 2% |
| Q2 2026 | Apr 1 – Jun 30 | 4% | 6% | 4% | 2% |
| Q3 2026 | Jul 1 – Sep 30 | TBD | TBD | TBD | TBD |
| Q4 2026 | Oct 1 – Dec 31 | TBD | TBD | TBD | TBD |
Rates for Q3 and Q4 2026 will be announced approximately one month before each quarter begins.
How the Prescribed Rate is Calculated
The base prescribed rate is the average yield on 90-day Government of Canada Treasury bills from the first month of the preceding quarter, rounded up to the nearest whole percentage.
| Rate Type | Formula |
|---|---|
| Base prescribed rate | T-bill average, rounded up |
| Overdue tax interest | Base + 2% |
| Refund interest | Base rate |
| Corporate overpayment | Base − 2% (minimum 0%) |
What the Prescribed Rate Affects
1. Employee and Shareholder Loans
If your employer or corporation provides you a low-interest or interest-free loan, you have a taxable benefit equal to:
Prescribed rate − interest you paid = taxable benefit rate
| Loan Scenario | Taxable Benefit (Q1 2026) |
|---|---|
| $100,000 interest-free loan | $4,000/year taxable benefit |
| $100,000 loan at 2% | $2,000/year taxable benefit |
| $100,000 loan at 4%+ | No taxable benefit |
2. Income-Splitting Loans (Section 74.5)
You can lend money to a lower-income spouse or family member at the prescribed rate to split investment income. The loan must:
- Charge interest at at least the prescribed rate in effect when the loan is made
- Interest must be paid by January 30 of the following year
- The rate is locked in for the life of the loan
| Prescribed Rate When Loan Made | Required Annual Interest on $500,000 Loan |
|---|---|
| 1% (Q1-Q3 2020) | $5,000/year |
| 2% (Q4 2022) | $10,000/year |
| 4% (Q1 2026) | $20,000/year |
Tip: The best time to set up a prescribed-rate loan is when rates are low. If you set up a loan when the rate was 1%, you only need to pay 1% interest for the life of the loan.
3. Overdue Tax Payments
Interest on unpaid taxes, instalments, and reassessments is charged at the prescribed rate + 2%:
| Quarter | Overdue Tax Rate |
|---|---|
| Q1 2026 | 6% |
| Q2 2026 | 6% |
This interest is not tax-deductible for individuals.
4. CRA Refund Interest
CRA pays interest on late refunds at the base prescribed rate:
| Quarter | Refund Rate |
|---|---|
| Q1 2026 | 4% |
| Q2 2026 | 4% |
Refund interest is taxable income — you’ll receive a T1 or T3 slip.
Prescribed Rate History
| Quarter | Rate | Quarter | Rate |
|---|---|---|---|
| Q1 2026 | 4% | Q1 2024 | 6% |
| Q2 2026 | 4% | Q2 2024 | 6% |
| Q3 2025 | 4% | Q3 2024 | 5% |
| Q4 2025 | 4% | Q4 2024 | 4% |
| Q1 2025 | 4% | Q1 2023 | 5% |
| Q2 2025 | 4% | Q2 2023 | 5% |
| Q3 2022 | 3% | Q3 2023 | 5% |
| Q4 2022 | 4% | Q4 2023 | 6% |
| Q1 2022 | 1% | Q1 2021 | 1% |
| Q2 2022 | 2% | Q1 2020 | 2% |
Long-Term Trend
| Period | Typical Rate |
|---|---|
| 2009-2021 | 1-2% |
| 2022-2023 | 1-6% (rising) |
| 2024-2026 | 4-6% (elevated) |
Strategies Using the Prescribed Rate
Prescribed Rate Loan for Income Splitting
- Lend money to your lower-income spouse at the current prescribed rate
- Spouse invests the funds and earns investment income
- Investment income is taxed in the spouse’s hands (lower bracket)
- Spouse pays you the prescribed rate interest by January 30 annually
- You report the interest income; spouse deducts the interest paid
Break-even analysis: The strategy is beneficial when the spouse’s investment return exceeds the prescribed rate, and the tax savings from splitting exceed the interest cost.
Corporate Shareholder Loans
- Borrow from your corporation at the prescribed rate to avoid a taxable benefit
- The rate must be at least the prescribed rate at the time of the loan
- Repay within one fiscal year to avoid the full loan inclusion under Section 15(2)
Where to find the current prescribed rate
CRA announces each quarter’s prescribed rate approximately one month before the quarter begins. To find the current and upcoming rates:
- Go to canada.ca/en/revenue-agency/services/tax/prescribed-interest-rates.html
- Rates are listed by quarter and year
- CRA also publishes the T-bill averages used to set each quarter’s rate
For tax planning purposes (particularly prescribed-rate loans), confirm the rate at the start of the quarter in which you are entering the arrangement. Once a loan is established at a prescribed rate, that rate is locked in for the duration of the loan — even if subsequent quarters see higher rates.