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The attribution rules in Canada say that if you give or lend money to your spouse or a young child, and they invest it, the tax on the income usually comes back to you. The idea is to stop a high earner from moving investment income to someone who pays less tax. Capital gains follow the same path with a spouse, but not with a minor child.
Who do the attribution rules cover?
Two groups. The first is your spouse or common-law partner. The second is a “related minor”, which the CRA’s archived bulletin describes as someone under 18 who is your child, your grandchild, your niece or your nephew.
Adult children, siblings and friends aren’t on that list. A gift to a 25-year-old son doesn’t send his interest income back to you. Whether that gift is a good idea is a different question, but it isn’t an attribution problem.
What comes back to you and what doesn’t?
Who got the money decides it. Here’s the short version, taken from the CRA’s bulletins IT-511R (spouses) and IT-510 (minors). Both are archived, so read them as a guide and check the Income Tax Act, section 74.1 onward, if a large amount is involved. You can read the spousal one on the CRA’s archived IT-511R page.
| Situation | Income from the property | Capital gain when sold |
|---|---|---|
| Gift or loan to a spouse | Taxed to you | Taxed to you |
| Gift or loan to a related minor | Taxed to you | Taxed to the child |
| Income earned on that income (second generation) | Taxed to the receiver | Taxed to the receiver |
| Business income made with the money | Taxed to the receiver | Not applicable |
The second-generation line surprises people. If your spouse gets $50,000 from you, the interest is yours. But when that interest is reinvested, the interest on the interest belongs to your spouse.
How does a prescribed rate loan work?
You lend the money instead of giving it, and you charge interest. The CRA bulletins say attribution doesn’t apply when the interest rate is at least the lesser of the prescribed rate and what unrelated people would agree on. And the interest has to be paid no later than 30 days after the end of each calendar year, so by January 30.
The CRA lists 3% as the rate for employee and shareholder loans in both the third and fourth quarters of 2026. The IT-511R wording measures the test “at the time the indebtedness is incurred”, so it’s the rate when the loan is made that matters, not what rates do afterwards. The bulletin doesn’t spell out whether that rate then stays fixed for the life of the loan, so confirm that point with a professional before you sign anything. Rates move each quarter, which is why some families pick a quarter when the rate is low.
What does it save on real numbers?
Say you earn $150,000 in Ontario and your spouse earns $30,000. Our engine puts the tax on your next dollar at about 43%, and on your spouse’s at about 19%. You lend $100,000 at 3% and it earns 5% in a term deposit. That’s $5,000 of income, $3,000 of which goes back to you as interest by January 30. You report the $3,000. What’s left for your spouse is the $2,000 difference, assuming the interest they pay is deductible against what the money earns (we didn’t confirm that on a CRA page, so check before you count on it).
Moving $2,000 from a 43% bracket to a 19% one saves roughly $490 a year. That’s real, but it’s small next to the $3,000 of interest you now report. It also needs returns that beat the loan rate. If they fall short, your spouse is paying interest out of pocket.
Use the marginal tax rate calculator to read your own numbers, and the income tax calculator for a full return. If the money will earn dividends, try the dividend tax calculator, because dividends are taxed on a different scale.
What happens if the interest is paid late?
This is the costly slip. IT-511R says that if the interest isn’t paid in time, the loan doesn’t meet the requirements for the exemption in that year or in any later year. One missed January 30 doesn’t just cost you a single year of attribution. It can undo the whole arrangement, and the investment income flows back to the lender from then on. Set a recurring reminder for early January, and have the payment come out of your spouse’s own bank account, not a shared one, so the paper trail shows who paid whom.
Where do people trip up?
The interest payment is the big one. The exception is written around it: no payment by the deadline, no exception, and the income comes back to you.
Selling something to your spouse needs care too. A sale at fair market value avoids attribution only when your spouse pays the full price in cash and the deal is done at that value. For capital property you also have to elect out of the automatic rollover, otherwise the gain is deferred instead of reported.
Attribution also stops in some cases. It ends when you and your spouse live apart because the relationship broke down, and for a minor it doesn’t apply once the child has turned 18 by the end of the year. If you’re weighing a sale that creates a gain, the capital gains tax calculator shows what the gain costs at your rate. Or run your year through the tax refund calculator first and decide whether the paperwork is worth roughly $490.
Where this information comes from
The rules come from two Canada Revenue Agency bulletins, IT-511R and IT-510, both archived. The 3% loan rate is from the CRA prescribed interest rate pages for July to September 2026 and October to December 2026. The tax rates in the example come from our income tax engine, which uses 2026 federal and Ontario data. This site has no link with the CRA, and none of this is advice for your own file.
Frequently asked questions
Do attribution rules apply to gifts to adult children?
No. The CRA's bulletins cover spouses, common-law partners and related minors under 18. An adult child's income from your gift is theirs.
Does a spouse loan avoid attribution?
It can, if you charge at least the prescribed rate (or the rate unrelated people would agree on, if lower) and the interest is paid by 30 days after year end.
Are capital gains attributed to me?
For a spouse, yes. For a related minor, income is attributed but capital gains are not.
What is the prescribed rate right now?
The CRA lists 3% for employee and shareholder loans in the third and fourth quarters of 2026. Check the current quarter on the CRA page before lending.
Does attribution apply to business income?
The bulletins say it doesn't. Money you give your spouse and they use to run a business produces business income that is theirs.
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