Disclaimer: I am neither a tax lawyer nor a tax accountant. Engage the services of a professional if you have doubts.

For most of my working career, I earned more than my spouse did and as a result, paid more income tax, too. Spousal RRSPs are a very easy way to split income down the road¹, but what about the here and now? Is there a way to shift income from one spouse to another without a whole lot of complexity² for THIS year’s tax return?

One thing I set up a few years ago was a spousal loan. The concept is pretty simple:

• You loan your spouse funds³
• These funds are used by your spouse for investment in a non-registered account
• You charge your spouse interest on that loan, which you must declare as income (and your spouse can deduct as an investment expense)
• Your spouse gets to keep capital gains, dividends and interest payments in their name and file them on their return, and thus pay less tax than you would on those gains.

Now, of course, there is the small matter of “what interest rate do you charge”? Since the name of the game is income-splitting it’s advantageous to charge as little as possible. But before you run to the exit and give an interest-free loan, there are prescribed rates set by the CRA, found here. The rate to use is called the “The interest rate used to calculate taxable benefits for employees and shareholders from interest free and low-interest loans” and it currently⁴ sits at 3%⁵⁶.

The nice thing about setting up such a loan is that the interest rate is fixed at the time you set it up. I feel pretty smart knowing that my spouse is paying a rock-bottom 1% annual rate and has done so since the 4th quarter of 2020.

So how to go about it? Like all things involving the CRA, it’s good to have records, so

• I set up a formal loan agreement dated, signed and archived. It spells out the date the loan was made, the amount, the payment schedule and so on. There’s lots of templates out there.
• I transferred the funds to my spouse using a cheque to create a paper trail.
• My spouse pays the interest due annually via eTransfer so there’s an email record
• I declare the interest as income on my tax return
• My spouse declares the interest expense on her tax return

One thing I haven’t figured out yet is when to dissolve this loan. In retirement, I’m not making more than my spouse, so perhaps it’s time to wrap up this arrangement⁷.

1. And if you’re careful, you can arrange to have you and your spouse have the SAME amounts in your respective RRSPs when it’s time to convert to a RRIF. ↩︎
2. I suppose there’s probably some way involving setting up a corporation and paying your spouse a salary, but that concept doesn’t work for everybody ↩︎
3. Left unsaid, is that you have to have spare cash available to actually loan this money and your spouse needs a way to invest it ↩︎
4. Q3 2025 ↩︎
5. According to multiple sources this is the interest rate of the 3-month treasury bill sold at auction. Who knew? ↩︎
6. If I were a betting man, I’d say this rate is likely to go lower before the end of the year. Returns need to exceed the interest rate charged for this to make sense but 3% is a pretty low bar. ↩︎
7. Or perhaps I’ll just wait until my bonus payouts from Questrade are done. Decreasing my spouse’s holdings will have an adverse effect on the bonus being paid. ↩︎