The interest on family income-splitting loans for 2019 must be paid by 30 January 2020 to avoid the application of attribution rules to investment income earned on the borrowed funds.
A family income-splitting loan allows income-splitting loan arrangements with family members (or a family trust). For example, if a taxpayer's spouse is in a lower tax bracket, the spouse with a higher income can lend money to the spouse with lower income to invest so that the investment income can be taxed at the lower income level. The interest on the loan must be paid annually by 30 January of the following year.
The prescribed interest rate has been 2% since 1 April 2018 and will remain at this rate until at least 31 March 2020. Family loans that were entered into during this period are subject to the 2% prescribed rate.
Read a January 2020 report prepared by the KPMG member firm in Canada
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