The Tax Blog for Smart Canadians

COVID-19 benefits are taxable

The benefits paid out by the federal government are all taxable. These include:

• the Canada Emergency Response Benefit (CERB)
• the Canada Emergency Student Benefit (CESB)
• the Canada Recovery Benefit (CRB)
• the Canada Recovery Caregiving Benefit (CRCB)
• the Canada Recovery Sickness Benefit (CRSB)

All of these benefits have to be added to your taxable income. Unfortunately, for some of them, like the CERB, no tax was withheld at source when they were paid out. This means that any tax due on those benefits would have to be paid fully on your tax return and will likely result in a balance owing.

To help alleviate this burden, the government recently announced that individuals who have a balance owing on their 2020 tax return and have received benefits related to the COVID-19 pandemic in 2020 will not be required to pay interest on that balance owing until April 30, 2022, as long as their taxable income is $75,000 or less.

Reimbursement of the Canada Recovery Benefit (CRB) based on your income

If you received CRB payments in 2020 and your net income, excluding the CRB received, is above $38,000, you will have to reimburse $0.50 of the CRB for every dollar of net income you earned above this limit. You will not have to pay back more than your benefit amount for that year. The reimbursement is done through your tax return.

Child care expense deduction eligibility

Eligibility for the child care expense deduction is based on the premise of using child care services to be able to work. Therefore, your child care expense deduction depends on the amount of earned income (employment/self-employment) you gained in the year. Of course, individuals who received COVID-19 benefits while not working would see their child care expense deduction reduced since they have less earned income to declare.

Thankfully, the federal government has amended the definition of “earned income” to include the COVID-19 benefits mentioned above as well as employment insurance (EI) benefits.

Where will I find these amounts?

All of the benefits mentioned above will be on a T4A slip, boxes 197 to 204. The CERB could also be included on a T4E slip, box 14.

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