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Many Canadians feel uncertain about the upcoming tax season. The deadline of April 30 (Or June 15 if you or your spouse is self-employed) is approaching fast and many of us may not understand how the Covid-19 benefits affect our tax return.
The CRB, like the CERB and the other Covid-19 benefits provided, is fully taxable. It is taxed the same way self-employment income is. This means that the responsibility for saving and paying what one owes fully lies on the individual. Giving back the government money that it gave you may seem counterintuitive: you would think that since the money comes from the source, it shouldn’t be given back right? Well, if you look at other government benefits such as Employment Insurance (EI) or Old Age Security (OAS) you will see that this is no different. Both are taxed the same way regular income is and in fact count as taxable income.
If you received Covid-19 benefits, you should start saving up for repayments. You’ll be receiving a T4A tax form from the government. This, like a T4 of an employer, includes the details of how much you got paid and what portion was withheld for tax purposes if any. If you received CERB through Service Canada instead of the CRA yo u benefits will be included on box 14 of your T4E slip.
One-time-only benefits such as payments for seniors and people with disabilities, Canada Childcare benefit, and top-ups to the GST/HST credit payment are not required to be counted as income. These will not be taxed.
Covid-19 benefits affect our tax return.
The CRB, like the CERB and the other Covid-19 benefits provided, is fully taxable. It is taxed the same way self-employment income is. This means that the responsibility for saving and paying what one owes fully lies on the individual. Giving back the government money that it gave you may seem counterintuitive: you would think that since the money comes from the source, it shouldn’t be given back right? Well, if you look at other government benefits such as Employment Insurance (EI) or Old Age Security (OAS) you will see that this is no different. Both are taxed the same way regular income is and in fact count as taxable income.
The government deducts a standard 10 per cent of the CRB at source which means you are already paying some taxes for it. You will be paying taxes back as if you worked for it so standard tax rates apply. And don’t forget about the tax brackets! Different incomes call for different taxation rates. A personal tax calculator can help you prepare for what you will need to pay, depending on your income. Doing so will keep you on your toes; no surprises from the CRA this time around!
Yes , you can! It is important for your financial wellbeing to take advantage of all ways available to you to reduce the taxes you will have to pay. If you worked from home due to Covid-19, you may be eligible to claim expenses to reduce your tax rate. A flat rate of $2 per day can be claimed, with a maximum of $400. If you’re claiming expenses above that you’ll need to keep your receipts. The government’s online calculator can help you further understand what you can save. More information about business write-offs and other ways to save taxes can be found in this article.
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