Attribution Rules in Canada: Gifts and Loans to a Spouse or Child

The attribution rules stop a higher-income family member from shifting investment income to a spouse or child just by handing them the money. If you give or lend money or other property to your spouse or common-law partner, the income it earns is taxed to you, and so are capital gains when they sell it, while you are resident in Canada and still together; if you give or lend it to a child, grandchild, niece or nephew under 18, the income (but not capital gains) is taxed to you until the year they turn 18. The main exceptions are a loan at the CRA's prescribed rate with each year's interest paid within 30 days after the year ends, a transfer for fair market value, and living apart after the relationship breaks down.

This page covers who the rules apply to, how the prescribed-rate loan exception works, the rule for loans to adult children, and the kinds of income that fall outside the rules. It is part of the investment tax hub. For the tax on giving property away in the first place, see gifting money to family; for what happens at death, see inheritance tax in Canada.

The conditions in full

The rules are in sections 74.1, 74.2 and 74.5 of the Income Tax Act. Each part, with its exceptions:

• Income or loss from property you transfer or lend to your spouse or common-law partner (or someone who later becomes one) is taxed to you for the time you are resident in Canada and they are your spouse or partner.
• When your spouse or partner sells that property, you usually report the capital gain or loss, if at the time of the sale you are resident in Canada and still together.
• Income or loss from property you transfer or lend to a person under 18 who doesn't deal with you at arm's length (such as your child or grandchild), or to a niece or nephew under 18, is taxed to you for each year before the year they turn 18.
• Capital gains on property given to a minor are not attributed to you: the capital gains rule covers only a spouse or common-law partner.
• The rules don't apply to a loan that charges interest at least at the prescribed rate in effect when it was made (or a lower arm's-length rate), with each year's interest paid no later than 30 days after the end of the year (January 30); the prescribed rate for loans made in Q4 2026 is 3%.
• They don't apply to a transfer for consideration worth at least the property's fair market value (any debt in it charging interest as above, and for a spouse, with an election out of the tax-deferred rollover).
• While you and your spouse or partner live apart because the relationship broke down, income is not attributed, and capital gains are not if you both sign an election.

Two points follow from these conditions. For a spouse or common-law partner, both the income and the capital gains come back to you. For a minor, only the income does: interest and dividends are taxed to you, while capital gains on the property stay with the child.

Worked examples

The prescribed-rate loan

The main exception is a genuine loan with interest: The rules don't apply to a loan that charges interest at least at the prescribed rate in effect when it was made (or a lower arm's-length rate), with each year's interest paid no later than 30 days after the end of the year (January 30); the prescribed rate for loans made in Q4 2026 is 3%.

Two details in subsection 74.5(2) shape how these loans work:

• The rate is fixed when the loan is made. The test is the prescribed rate “in effect at the time the loan was made”, so a loan made in a low-rate quarter keeps that rate even when the CRA’s quarterly rate rises. The CRA prescribed interest rate page lists the rate for each quarter.
• Every year’s interest has to be paid on time. The exception requires the interest for the year, and for each earlier year of the loan, to have been paid by the deadline. A single late or missed payment therefore ends the exception for that year and every later year of the loan.

The borrower reports the investment income, and whether they can deduct the interest they pay follows the usual rule for interest: Interest is deductible when the borrowed money is used to earn income from a business or property, such as rent, interest or dividends, whatever secures the loan; it follows the money's current use, which you must be able to trace, and it isn't deductible on money used personally, on money borrowed for an RRSP, TFSA or FHSA contribution, or on an investment that can only produce capital gains. The lender reports the interest received as income.

Loans to adult children and other relatives

The section 74.1 rules cover a spouse or common-law partner and related minors. A gift to a child who is 18 or older is outside them, so the income on that gift is the child’s.

Loans are treated differently. Under subsection 56(4.1), income from property bought with a loan from a relative you don’t deal with at arm’s length is taxed to the lender if one of the main reasons for the loan was to reduce or avoid tax. Subsection 56(4.2) switches that rule off on the same terms as the prescribed-rate exception above: interest charged at least at the lesser of the prescribed rate in effect when the loan was made and an arm’s-length rate, with each year’s interest paid on time.

Income that falls outside the rules

• Your spouse’s own earnings. The rules follow property you give or lend. Money your spouse earns and invests is not property you transferred, so its income is theirs. Some couples arrange for the higher earner to cover household costs so that the lower earner’s pay can be invested.
• The Canada child benefit. The CRA’s line 12100 page says that interest earned on Canada child benefit payments deposited into a bank account or trust in your child’s name is included in your child’s income.
• Income on income. As in the first example, income earned by reinvesting attributed income belongs to the person who holds it (IT-511R).
• Business income. IT-511R says subsections 56(4.1) and 74.1(1) do not attribute business income or losses, even if the business uses property that came from the transferor. The rules apply to income from property, such as interest, dividends and rent. One exception: a specified member of a partnership (essentially a limited partner or an inactive partner) has their share of the partnership’s income or loss deemed by subsection 96(1.8) to be income or loss from property for these rules, so it can be attributed.
• An inheritance. Money your spouse inherits is their own property, not property you gave or lent.
• Spousal RRSPs. Contributions to a spousal RRSP have their own attribution rule for withdrawals: A withdrawal from a spousal RRSP is taxed to the contributing spouse, up to what they contributed to any spousal RRSP in the year of the withdrawal or the two years before, unless the couple had separated because the relationship broke down, either was a non-resident, the contributor died that year, or the money moved directly to another registered plan or an eligible annuity; RRIF withdrawals above the minimum, and transfers to the annuitant's FHSA that count as taxable withdrawals, are caught the same way. Details are on spousal RRSP attribution.
• RESPs. Income in an RESP grows inside the plan and is taxed under the plan’s own rules when it is paid out.

Private corporations and family trusts: TOSI

When family members receive dividends or interest from a family business, a separate regime, the tax on split income, can apply instead: Since 2018, the tax on split income (TOSI) also applies to adults: dividends or interest (not salary) and certain capital gains that a family member gets from a private corporation's related business are taxed at the top marginal rate unless an exclusion applies. The main exclusions: the person is actively engaged in the business (on average at least 20 hours a week in the year or any five earlier years); at 25 or older, they own excluded shares or get a reasonable return for their work, property and risk; from 18 to 24, the amount is a safe harbour capital return or a reasonable return on arm's-length capital they contributed; or the amount would be excluded for their spouse or common-law partner aged 65 or older. The real estate investing corporation page covers it in more detail, and family trusts covers trust structures.

Records to keep

Related pages

• Investment tax hub
• Gifting money to family in Canada
• Inheritance tax in Canada
• CRA prescribed interest rate
• Spousal RRSP guide
• In-trust accounts for children
• Pension income splitting
• Family trusts in Canada
• Marginal tax rate calculator