Attribution Rules
Règles d'attribution in French
Quick definition
Attribution rules are the CRA provisions that tax investment income back to the person who supplied the money. Gift money to your spouse or minor child to invest, and the income (and, for spouses, the capital gains) is generally taxed on your return, not theirs.
Why the rules exist and what they catch
Canada taxes individuals, not households. A couple where one person earns $200,000 and the other earns nothing pays far more tax than a couple earning $100,000 each, because the high earner's income sits in high brackets at a steep marginal tax rate. The obvious fix would be to hand investment money to the lower-income spouse and let the returns be taxed at their low rate. The attribution rules exist precisely to block that move.
The core rules: money gifted to a spouse or common-law partner attributes both the income (interest, dividends, rent) and the capital gains it earns back to the giver, who pays the tax as if the transfer never happened. Money gifted to a minor child, grandchild, niece or nephew attributes the income back, but not the capital gains. And loans to either group at less than the CRA's prescribed interest rate attribute the same way, so lending at zero interest fixes nothing. See capital gains tax for how attributed gains are ultimately taxed.
The exceptions that make planning possible
The useful heart of the topic is not the rules but the openings the rules deliberately leave. Each of these is a fully legitimate way to get investment income taxed in lower-income hands:
- Spousal RRSP contributions. A spousal RRSP is a sanctioned income-splitting tool: once withdrawals clear its 3-year rule, they are taxed to your spouse, with no attribution.
- Gifts for a spouse's TFSA. Give your spouse money to contribute to their own TFSA and attribution does not apply while the money stays inside, because TFSA income is not taxable to anyone. This is the cleanest strategy on the list.
- The higher earner pays the bills. Attribution follows gifted capital, not household bookkeeping. If the higher earner pays the rent, groceries, and taxes while the lower earner invests their own salary, every dollar of investment income is taxed at the low rate. Same cash flow, no attribution.
- Prescribed-rate loans. Lend your spouse money at the CRA's prescribed rate (set quarterly; check the current figure), with interest actually paid each year by January 30, and attribution is switched off. Returns above the interest are taxed to the borrower, and the rate in effect when the loan is made is locked in for its life.
- Second-generation income. Attribution applies to income earned on the gifted capital, not to income earned on that income. Reinvested attributed income compounds in the recipient's hands, so even an imperfect transfer improves with time.
- Adult children. Gifts to children 18 or over carry no attribution at all. One caution: the separate TOSI (tax on split income) regime can still tax an adult child at the top rate on private-company dividends and similar amounts.
Minor children: the capital gains gap
The asymmetry for minors is worth exploiting deliberately. Because capital gains on assets gifted to a minor do not attribute, growth-oriented investments held for a child, in an informal in-trust account for example, can compound with the gains taxed to the child, who usually pays nothing; only the interest and dividends flow back to you. The same logic is one reason RESPs work so well: RESP growth is taxed to the student on withdrawal, not to the contributor.
The rules also stop attributing in other situations: at divorce or separation, at the death of the giver, or if the recipient ceases to be a Canadian resident. And attribution for a minor ends in the year the child turns 18.
In Canada
The attribution rules are federal, and Québec applies the same logic on the provincial return, so there is no province where simple gifting works. Common-law partners are treated as spouses once they meet the tax definition. Since the pandemic-era low of 1%, the prescribed rate has moved with interest rates, which is why prescribed-rate loan planning goes in and out of fashion; the loan's rate is fixed at signing, so these arrangements are typically set up when the rate is low. Miss the January 30 interest payment even once and attribution applies to the loan from then on, permanently, so automate the payment.
Worked example
Nadia earns $250,000 and her spouse Paul earns $15,000. Nadia hands Paul $100,000 to invest, and the portfolio earns $5,000 a year. Because it was a gift, the full $5,000, income and capital gains alike, attributes back to Nadia and is taxed at her top rate, roughly half of it gone to tax. The transfer accomplished nothing.
Instead, Nadia lends Paul the $100,000 with a signed loan agreement at the prescribed rate. Suppose the rate at signing is 3% (a hypothetical figure; the CRA sets the actual rate quarterly). Paul pays Nadia $3,000 of interest by January 30 each year; she reports it as income, he deducts it. The portfolio's $5,000 return, minus the $3,000 interest, leaves $2,000 taxed to Paul at nearly 0%, and every future dollar of growth above the locked-in 3% belongs to his low brackets too. On a larger portfolio or a wider rate spread, the annual savings scale up accordingly.
Reviewed by Alexandre Bernier, CFP®, CIM®, PFP®·Updated July 2026