If your corporation lent you money, subsection 15(2) of the Income Tax Act adds the whole loan to your personal income, in the tax year the loan was made, not the year you notice it. Subsection 15(2.6) switches that off if the loan is repaid within one year after the end of the corporation’s fiscal year in which it was made, and the repayment is not part of a series. For a 31 December 2025 year-end, that deadline is 31 December 2026.
Table of contents
- Quick answer: the deadline, in one table
- What subsection 15(2) actually does
- The year that gets taxed is the year the loan was MADE, not the year the window closes
- The one-year repayment rule, and the trap inside it
- What it costs if you miss it
- The interest benefit under subsection 80.4(2) is a separate charge
- The loans your corporation can make you that are never included
- Four ways to clear a debit balance before year-end
- A 30-day action plan before your year-end
- Frequently asked questions
- Clean up your shareholder loan account before your year-end closes
Quick answer: the deadline, in one table
The clock is set by the corporation’s fiscal year-end, not the date you borrowed. Find your year-end below for the repayment deadline and the tax year at risk.
| Corporation’s fiscal year-end | Loan must be repaid by | Your personal tax year that gets reassessed if it is not |
|---|---|---|
| 31 December 2025 | 31 December 2026 | 2025 |
| 30 June 2025 | 30 June 2026 | 2025 |
| 31 March 2025 | 31 March 2026 | 2025 |
Whatever the year-end, the loan is taxed in the calendar year it was made, and the window runs from the lender’s year-end, not the date the cheque cleared.
What subsection 15(2) actually does
Under subsection 15(2) of the Income Tax Act, a loan or debt owed by a shareholder to their corporation is included in the shareholder’s income, subject to exceptions covered below.
It adds the whole loan, not the interest, to your personal income
This is the point most owner-managers miss: subsection 15(2) is not an interest charge, it is a straight income inclusion of the entire principal outstanding, at your marginal rate. A $150,000 shareholder loan that fails the exception is $150,000 of personal income, regardless of any interest charged.
It applies to a loan or a debt, and to a person connected to a shareholder
The provision covers a “loan” and a “debt,” capturing expense accounts and uncollected reimbursements, and reaches amounts owed by a person “connected with” a shareholder, so routing an advance through a spouse does not avoid it.
Key terms in plain English
- Shareholder loan account — the ledger of every advance and repayment between an individual and their corporation.
- Debit balance — the corporation has lent more than has been repaid; credit balance is the reverse.
- The lender’s tax year — the corporation’s own fiscal year, which starts the one-year clock, not the shareholder’s personal tax year.
The corporation and its shareholder are separate legal persons, which is why a loan between them is a taxable event, not a bookkeeping non-event. Our incorporation guidance covers how that structure works.
The year that gets taxed is the year the loan was MADE, not the year the window closes
This is where most explanations of shareholder loans go wrong.
What CRA’s folio says, word for word
Income Tax Folio S3-F1-C1, paragraph 1.16, states: “The tax year referred to in subsection 15(2) is the tax year of the borrower. The date a loan is made determines the tax year of the borrower in which the loan is included in income.”
Subsection 15(2) of the Income Tax Act includes a shareholder loan in the borrower’s income for the tax year in which the loan was made, not the year the repayment window closes (CRA Income Tax Folio S3-F1-C1, paragraph 1.16).
Subsection 15(2.6), if it applies, removes the inclusion entirely rather than deferring it. If it does not, the inclusion still lands in the year the money was advanced.
Why this means a prior year’s return gets amended
Folio S3-F1-C1, paragraph 1.73, states: “Since it is not known whether the requirements of subsection 15(2.6) are met until one year after the end of the lender’s tax year in which the loan was made, sometimes a borrower’s tax return for a prior year will need to be amended.”
Because the one-year test cannot be settled until the window closes, a shareholder’s prior-year personal return may have to be amended (Folio S3-F1-C1, paragraph 1.73).
A T1 filed years earlier can be reopened once the window closes. Our CRA representation service handles these reassessment notices.
Worked example: a loan taken in November 2025, unpaid on 31 December 2026
A corporation with a 31 December fiscal year-end advances $80,000 to its owner-manager in November 2025, and it is not repaid.
- The corporation’s fiscal year-end for that loan is 31 December 2025, so the one-year window under subsection 15(2.6) runs to 31 December 2026.
- The loan is not repaid by that date.
- The $80,000 is included in income for the year it was made — the shareholder’s 2025 tax year, not 2026, and the 2025 T1, already filed in April 2026, is reassessed accordingly.
- Arrears interest then runs on the balance from the original 2025 filing deadline, at 7% for both the third and fourth quarters of 2026.
The one-year repayment rule, and the trap inside it
The rule: repaid within one year after the end of the lender’s tax year
Subsection 15(2.6) turns off the subsection 15(2) inclusion where the loan is repaid within one year after the end of the corporation’s tax year in which it was made, and the repayment is not part of a series of loans or other transactions and repayments.
It is the corporation’s fiscal year-end that sets the clock, not the date you borrowed and not your own tax year
Most owner-managed corporations run a calendar fiscal year, which is part of why the rule is easy to misread. A corporation with an off-calendar year-end, say 30 June, sets the deadline at the following 30 June, regardless of when in that fiscal year the money moved.
“Not part of a series of loans or other transactions and repayments”
Folio S3-F1-C1, paragraphs 1.83 to 1.86, address this: a repayment is not enough on its own if the facts show it and a later re-advance are one continuous arrangement. This is a facts-and-circumstances test with no bright-line number of days or dollar threshold, and no credible source should tell you otherwise.
Why repaying on 30 December and re-borrowing on 2 January does not work
Clearing the balance right before year-end and taking it back out days into the new year is the exact pattern the “series” test exists to catch, and CRA can treat the loan as never genuinely repaid.
What it costs if you miss it
The inclusion itself, at your marginal rate
The core cost is the full principal, taxed as ordinary income at the shareholder’s marginal rate. There is no preferential rate and no fifty per cent inclusion, unlike a capital gain.
Arrears interest on a reassessed prior year
CRA charges arrears interest on the reassessed balance from that year’s original filing deadline. The prescribed rate, set under section 4301 of the Income Tax Regulations, is 7% for both the third and fourth quarters of 2026, compounding daily until paid.
The deduction you get later under paragraph 20(1)(j), and why “included now, deducted later” is not a wash
Under paragraph 20(1)(j), a shareholder who later repays a loan already taxed can deduct the repayment, but only in that later year, at that year’s rate, without offsetting arrears interest already charged, and denied outright if the repayment is itself part of a series of loans or other transactions and repayments.
The interest benefit under subsection 80.4(2) is a separate charge
A common misconception treats the deemed interest benefit as stacking on top of a subsection 15(2) inclusion. It does not:
How it is computed: prescribed rate (Reg. 4301) minus interest actually paid
Subsection 80.4(2) (see Income Tax Folio S3-F1-C2) imputes a taxable benefit where a shareholder receives a loan below a commercial rate: the CRA’s prescribed rate (set quarterly under section 4301, per subsection 80.4(7)), applied to the outstanding balance, less interest actually paid.
The CRA prescribed rate used to calculate taxable benefits on interest-free and low-interest loans to employees and shareholders is 3% for both the third and fourth quarters of 2026.
The 30-day rule: interest paid “in the year or within 30 days thereafter” — accruing is not paying
The offsetting side counts only interest actually paid, not accrued in the books. Folio S3-F1-C2 describes it as interest “paid in the year or within 30 days thereafter” — a journal entry with no cash transfer in that window gets no credit.
Under subsection 80.4(2), only interest paid in the year or within 30 days after the end of the year reduces the deemed benefit; accruing interest in the accounts does not.
When it does not apply: 80.4(3)(a) commercial-rate loans, and 80.4(3)(b), no stacking with a 15(2) inclusion
Paragraph 80.4(3)(a) turns off the deemed benefit where the rate charged is at or above an arm’s-length commercial rate. Paragraph 80.4(3)(b) resolves the stacking question: it turns off subsection 80.4(2) where the loan is already included in income under Part I.
Subsection 80.4(2) and subsection 15(2) do not stack: paragraph 80.4(3)(b) turns the deemed interest benefit off for a loan already included in income under Part I (Folio S3-F1-C2, paragraph 2.15).
The loans your corporation can make you that are never included
Where the borrower is also a genuine employee, exceptions in subsection 15(2.4) can take a loan out of subsection 15(2) entirely.
The four situations in paragraphs 15(2.4)(a) to (d)
Folio S3-F1-C1, paragraph 1.37, confirms subsection 15(2.4) removes certain shareholder-employee loans from subsection 15(2) where the loan falls into one of four categories: a home-purchase loan, a loan for previously unissued treasury shares of the corporation (or a related one), a work-vehicle loan, and certain other employment-related loans.
The two conditions everyone forgets: 15(2.4)(e) and (f)
Paragraphs 15(2.4)(e) and (f) add two conditions: the loan must arise from the borrower’s employment, not their shareholdings, and there must be a genuine, bona fide arrangement showing repayment will happen.
Why “I’m an employee too” is not on its own enough
Many owner-managers are both, but that alone is not enough. CRA looks at whether the loan would have been made to an arm’s-length employee on similar terms; a loan only an owner would receive is treated as flowing from the shareholding, and subsection 15(2) applies in full.
Four ways to clear a debit balance before year-end
- Cash repayment. Simplest where the corporation has funds and the shareholder can transfer cash back before the deadline.
- Declare a dividend. Apply it against the loan instead of paying it out separately; see our guide on whether to pay yourself salary or dividends. If it goes to a lower-income family member, the tax on split income (TOSI) rules need checking first.
- Run a bonus through payroll. Withhold and remit source deductions, and apply the net proceeds against the loan, reviewing the deduction-timing implications before year-end.
- Reclassify genuine expense reimbursements that were mis-coded. Part of a “shareholder loan” is sometimes a legitimate business expense paid personally and never reimbursed. A virtual CFO engagement is a practical way to review this before the deadline.
Whichever mechanism you use, the corporation’s T2 filing is where the loan gets reported and reconciled against your corporate tax filing checklist; our corporate tax filing service handles that work.
A 30-day action plan before your year-end
A 30-day action plan before your year-end.
- Pull the shareholder loan account.
Get the full ledger of every advance and repayment for the year.
- Date every advance.
Confirm the exact date each outstanding amount was advanced.
- Find the corporation’s year-end.
Do not assume it matches the calendar year or your own tax year.
- Map each advance to its deadline.
Calculate the one-year deadline from the end of the lender’s fiscal year.
- Decide the clearing mechanism.
Cash, dividend, bonus or a documented reclassification, based on cash position and personal tax situation.
- Document it.
Keep a paper trail showing the repayment happened, when, and that it was not reversed shortly after, given the series-of-loans test above.
A stale, growing debit balance is also one of the patterns what triggers a CRA audit discusses; keeping the account current is worth doing for that reason alone.
Frequently asked questions
Under subsection 15(2.6), a loan a corporation makes to its shareholder is not included in income if it is repaid within one year after the end of the corporation’s fiscal year in which it was made, and the repayment is not part of a series of loans or other transactions and repayments.
The shareholder’s tax year in which the loan was made, not the year the window closes. CRA Income Tax Folio S3-F1-C1, paragraph 1.16, states the date a loan is made determines the year it is included in income, which is why a prior year’s return can be reassessed once the deadline passes.
Not reliably. CRA applies a facts-and-circumstances test for a “series of loans or other transactions and repayments” (Folio S3-F1-C1, paragraphs 1.83 to 1.86). If a repayment and a later re-advance are really the same money moving out and back, CRA can treat the loan as never genuinely repaid.
No, but an interest-free or low-interest loan can trigger a deemed benefit under subsection 80.4(2). Only interest actually paid, in the year or within 30 days after, reduces that benefit; interest merely recorded as accrued does not count.
Yes. A corporation can declare a dividend or run a bonus through payroll and apply the net proceeds against the loan rather than requiring a separate cash repayment. See our guide on whether to pay yourself salary or dividends for how that broader decision is usually made.
You can generally deduct the repayment under paragraph 20(1)(j), but only in the year you actually repay it and at that year’s rate. The deduction is denied if the repayment is itself part of a series of loans or other transactions and repayments.
Yes. Subsection 15(2.4) exempts certain loans to a shareholder-employee falling into one of four categories in paragraphs 15(2.4)(a) to (d), such as a home-purchase loan or a work-vehicle loan, provided the loan arises from employment rather than shareholdings and there is a genuine, bona fide repayment arrangement (paragraphs 15(2.4)(e) and (f)).
Clean up your shareholder loan account before your year-end closes
A shareholder loan account running for years with no clear repayment history is a common thing to inherit, not create deliberately. Getting ahead of it before your year-end, rather than after CRA has reassessed a prior return, is almost always cheaper.
We work with owner-managed corporations across Toronto, Markham and Richmond Hill to review shareholder loan accounts and decide the right clearing mechanism before the clock runs out. If your year-end is approaching and you are not sure where your shareholder loan account stands, talk to us before you file.
This article is general information current as of September 2026 and is not tax or legal advice. Shareholder loan rules depend on the precise facts of each loan, corporation and shareholder — speak with a qualified professional before acting on any of the above.