CERB has provided help to many Canadians during the COVID-19 pandemic. Now that tax time is approaching, it is important to know what the benefit means for your tax return.

The Canada Emergency Response Benefit (CERB) paid $500 a week to millions of Canadians, allowing them to continue paying bills and purchasing necessities. It was designed to aid those whose income and employment were impacted by the pandemic. Recipients were entitled to receive the benefit for up to 28 weeks, amounting to a maximum of $14,000.

If you received CERB payments, it’s time to consider how it might impact your income tax.

Is CERB Taxable?

Yes, CERB is considered taxable income and will need to be accounted for on your 2020 tax return. It should be treated just like regular employment income. The only difference is that, while your employer would typically deduct taxes from your paycheck, the government did not deduct tax from the benefit.

You will be sent a tax slip for benefits received in the mail, and you can also view your slips online in your CRA My Account. When filing your tax return, you will be responsible for declaring the total amount received.

Note that other benefits introduced during the pandemic, including the Canada Recovery Benefit (CRB), the Canada Recovery Sickness Benefit (CRSB), the Canada Recovery Caregiving Benefit (CRCB), and the Canada Emergency Student Benefit (CESB), are all considered taxable income as well and must also be declared.

How Much Will I Owe?

The amount you end up owing on your 2020 tax return will depend on a number of factors. The first is the federal basic personal amount, which is $13,229 for 2020. This is the amount you can earn before owing income tax. It means that, if you received the full CERB benefit of $14,000, you may end up owing a small amount.

Of course, if you earned any other employment income before, during, or after receiving CERB payments, it will affect your marginal tax rate and also impact your tax owing. For example, if you earned over the basic personal amount but under $48,536, then your income will be taxed at the lowest 2020 income tax rate of 15%.

Note that you may also be eligible to claim certain credits on your tax return, like the education tax credit and the climate action incentive. After taking credits into account, it is possible that you will receive a tax refund instead.

Preparing for Tax Time

Now that you know what CERB means for your income tax return, it’s time to start preparing. Take a look at your finances and determine if you have enough set aside to pay what you might end up owing. If not, there is still time to draw up a budget and put away an amount from every paycheck to cover the taxes on your CERB and other income.

Going into tax season fully prepared is the best way to avoid any surprises. Do your calculations and estimations now for quick filing and prompt payment of any tax owing.