CRA prescribed interest rates 2026: 3% all year, 7% on overdue tax

Every 2026 quarter in one table

The base prescribed rate held at 3% for all of 2026, and so did every rate built on it. The only figure that moved was the pertinent loan rate, which is rounded to two decimals instead of a whole percent. Rates are from the CRA pages for canada.ca, canada.ca, canada.ca and canada.ca.

As of October 12, 2026, the CRA's index of quarterly rates stops at the fourth quarter of 2026 canada.ca. The Q4 page went up on August 28, 2026, about a month before the quarter started canada.ca. GST/HST, the Underused Housing Tax and the Luxury Tax use the same 7%, 3% and 5% on their quarterly pages.

The base rate last changed on July 1, 2025, when it fell from 4% in Q2 2025 canada.ca to 3% in Q3 2025 canada.ca. A loan your client made before that date is locked at the old rate.

Which rate applies to what

Every number in the table comes from one input: the average yield on three month Government of Canada Treasury bills auctioned in the first month of the preceding quarter. Regulation 4301 rounds that average up to the next whole percent and then adds a spread laws-lois.justice.gc.ca.

The pertinent loan rate applies when a Canadian resident corporation is owed a pertinent loan or indebtedness by a nonresident corporation, and subsection 17.1(1) imputes interest on it laws-lois.justice.gc.ca.

For how the 7% compounds daily on a balance owing, see CRA interest on overdue taxes. For late or short instalments, see instalment interest. The rest of this page is about the 3%.

The prescribed rate loan: locked at the loan date, interest by January 30

A loan to a spouse or common law partner, or to a related minor, escapes attribution under 74.1(1), 74.1(2) and 74.2 when subsection 74.5(2) is met laws-lois.justice.gc.ca. Two conditions do the work. The interest rate must be at least the lesser of the prescribed rate in effect when the loan was made and an arm's length rate. Interest for each year must be paid no later than 30 days after that year ends, which is January 30.

Because the test looks at the rate when the loan was made, a loan made in any 2026 quarter carries 3% for its whole life. If the prescribed rate climbs to 4% or 5% later, the loan stays at 3%.

Take a $200,000 loan to your client's spouse on October 1, 2026, at 3%. Interest for 2026 is $200,000 × 3% × 92 / 365 = $1,512.33, due by January 30, 2027. From 2027 on, it is $6,000 a year, due by January 30 of the following year. The lending spouse reports that interest as income, and the investment income on the $200,000 stays with the borrowing spouse.

The gotcha is the payment date. The condition covers the current year and every preceding year, so one payment made on January 31 fails 74.5(2) for that year and for every later year of the same loan. Put the January 30 payment in the file each year with proof it cleared.

Worked example: an interest free employee loan in 2026

Under subsection 80.4(1), an employee who gets a low interest or interest free loan because of employment has a benefit equal to interest at the prescribed rate, less interest paid for the year no later than 30 days after year end laws-lois.justice.gc.ca. The CRA computes it quarter by quarter: principal × prescribed rate × days in the quarter / 365 canada.ca.

Your client lends an employee $73,000 on January 1, 2026, at 1%, with no principal repaid during the year. At 3%, that is exactly $6 of interest a day.

The employee owes 1% interest, $730, and pays it on January 20, 2027. The taxable benefit is $2,190 minus $730, or $1,460. If the $730 is paid on February 15, 2027 instead, it misses the 30 day window and the 2026 benefit is the full $2,190.

Report the $1,460 on the T4 in box 14 and with code 36, and include it in box 26. Withhold income tax and CPP on it, but not EI, and there is no GST/HST because financial services are exempt canada.ca. See T4 box 14 for how it rolls into employment income.

If the employee used the loan to buy an investment that earns income, section 80.5 deems the benefit to be interest paid for paragraph 20(1)(c), so it can be deducted as interest when the 20(1)(c) conditions are met laws-lois.justice.gc.ca.

Home purchase loans, short loans and shareholder loans

Home purchase and home relocation loans get a ceiling. Under 80.4(4), the benefit can't exceed interest at the prescribed rate in effect when the loan was received, so a home loan made in 2026 is capped at 3%. If the rate later drops below the ceiling, the lower quarterly rate applies canada.ca.

The ceiling doesn't last forever. Under 80.4(6), a home loan with a term longer than five years is treated as a new loan five years after it was made, at the prescribed rate in effect on that date laws-lois.justice.gc.ca.

Small, short employment loans can skip the calculation. Since January 1, 2023, the CRA does not tax the benefit when total loans to the employee are $10,000 or less in the calendar year, the term is 60 days or less, and the loan isn't received because of shareholdings. Miss the 60 day repayment and the full benefit is taxable on that year's T4 canada.ca.

A shareholder loan uses the same 3% under 80.4(2), but the benefit goes on a T4A with code 117, not a T4 canada.ca. The relief for small short loans does not apply to shareholders. Whether the principal itself becomes income under 15(2) is a separate question, covered in shareholder loan rules.