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The 3% Trick For Your Kids

Your kids can legally earn $25,000 a year and pay almost zero tax. It is called a prescribed rate loan trust. You lend money to a family trust at CRA's prescribed rate (currently 3%). The trust invests it. The returns flow to your kids – taxed in their hands, not yours. The savings? Up to $12,000 a year on interest income alone. But there is a catch. One type of investment income actually makes this strategy backfire. And one missed date can collapse the whole thing.