Did you receive the Canada Emergency Response Benefit (CERB) or the Canadian Emergency Student Benefit (CESB) in 2020?

These benefits are taxable and you’ll be sent a tax slip that confirms how much you received in 2020. No taxes were withheld before these benefits were paid to you. You may owe tax, depending on how much taxable income you declare for 2020.

For example, if your taxable income for 2020 comes to $40,000, including $10,000 in CERB payments, you could owe $2,000 in taxes! Plus, the benefit you received may also impact how much you receive under other government programs like the Canada Child Benefit, GST/HST credit, Ontario Trillium Benefit, Ontario Child Benefit, etc.

What are your options?

Making an RRSP contribution for 2020 can make a big difference.

If you have a TFSA or cash savings and RRSP contribution room, consider making an RRSP contribution before March 1, 2021. Since this will lower your net income for 2020, it could reduce the impact on your other government benefits.

Of course, you won’t owe taxes if your taxable income for 2020 was less than the basic personal amount ($13,229 at the federal level and $15,715 at the provincial level).

 

If you worked from home, don’t forget to deduct your home office expenses.

When preparing your 2020 tax return, you can claim home office expenses incurred during the COVID-19 pandemic at both the federal and provincial levels, provided that you:

• Paid for these expenses yourself
• Worked at home more than 50% of the time for at least 4 consecutive weeks in 2020 due to the COVID-19 pandemic
• Your employer has not and will not reimburse these expenses

If you choose the simplified method, you can deduct $2 for each day that you worked from home in 2020, up to a maximum of $400 for each level of government. You won’t have to keep any documents to support your claim and your employer won’t need to issue any declaration of employment conditions forms.

If you choose the detailed method, keep in mind that this option is based on your actual expenses during the period when you worked from home. Your employer will need to provide you with certain forms. You’ll also have to keep documents supporting your claim and present them if you get audited.

Tip

Choose the claim method that’s most beneficial for you. Click the link below to access the calculator (coming soon):

• Government of Canada: Calculate your expenses

More information

Click the link below for more information on home office expenses for employees:

• Government of Canada: FAQ – Home office expenses for employees

 

Did you receive the Canada Recovery Benefit (CRB), Canada Recovery Caregiving Benefit (CRCB) or Canada Recovery Sickness Benefit (CRSB)?

These benefits are taxable and you’ll get a tax slip that confirms how much you received in 2020. Unlike the CERB and CESB programs, 10% was already withheld at the source to cover federal taxes.

What to expect in April: The taxes withheld at the source may not have been enough, depending on how much taxable income you declare for 2020. This means you might still owe tax. For example, if your taxable income in 2020 was $30,000, including $5,000 from these programs, you could owe $500in taxes!

If you received CRB payments and your net income (excluding the CRB) was more than $38,000, you will have to reimburse $0.50 of the CRB for every dollar of net income you earned above $38,000, up to the total of your benefit amount. It’s due at the same time as your income tax return. You don’t have to pay tax on the amount you reimburse.

What are your options?

Making an RRSP contribution can make a big difference. If you received CRB payments, try to lower your net income (excluding the CRB payment amount) at the federal level to $38,000 so that you don’t have to reimburse the CRB.

If you have a TFSA or cash savings and RRSP contribution room, consider making an RRSP contribution before March 1, 2021. This will lower your net income for 2020. Lowering your net income could also reduce any impacts on other government benefits.

Of course, you won’t owe taxes if your taxable income for 2020 was less than the basic personal amount ($13,229 at the federal level and $15,715at the provincial level).

 

One-time payment for seniors collecting Old Age Security (OAS), the Guaranteed Income Supplement (GIS), a spousal allowance or a survivor allowance

These payments are not taxable. You won’t receive a tax slip and the amount you received doesn’t need to be declared in your 2020 tax return.

All eligible OAS recipients received $300 in June 2020.Seniors who were also eligible for the GIS received an additional $200 for a total of $500. In addition, a $500 payment was made to individuals collecting spousal or survivor allowance.

More information

Government of Canada: One-time tax-free payment for seniors

 

Note: This article is based on the latest available information. However, the terms surrounding government programs and relief measures are subject to change at any time.