Change Is Coming: Understanding Your Opportunity For Income Splitting

With the increase in prescribed interest rates set for July 2022, one of the last remaining opportunities to income split amongst family members is about to increase in cost. This opportunity is available to families who are interested in earning investment income.

What you need to know

• Currently, a family with one or more members earning less than $220,000 per year can save tax by putting in place a prescribed rate inter-family loan. This typically occurs by having a parent make a loan to a family trust (of which their spouse or minor children may be beneficiaries) at 1 per cent.
• The recipient of the loan (spouse, children and/or trust) then invests it in publicly traded securities and pays the lender 1 per cent.