Split Your Income - Save Tax!
One way to achieve this income splitting is through the use of a “prescribed rate loan” and the time to set one up has never been better. From now until at least June 30, 2009 the Canada Revenue Agency (“CRA”) prescribed interest rate is set at 1% - an all-time low!
The prescribed rate is the base interest rate used in the calculation of all interest rates referenced in the Income Tax Act. It is established each calendar quarter as the effective yield (rounded to the next higher whole percentage) on a 90 day Government of Canada Treasury Bill issued during the first month of the preceding quarter. The prescribed rate is also used to determine whether or not an income splitting arrangement between spouses or minor children is allowable.
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