CERB Payments Are Actually Taxable & You Could End Up Paying It Back
Be prepared to add CERB payments to your taxes!
Since the federal government launched the Canada Emergency Response Benefit last month, millions of Canadians have applied for the temporary funding. While the $2,000 per month payment is super helpful right now, it’s important to remember that it may have to be paid back. If you’re wondering, “is CERB taxable?”, the answer is yes!
Back in March, Justin Trudeau revealed the Canada Emergency Response Benefit, otherwise known as CERB.
The funding is specifically designed to support those who have limited or lost work due to the COVID-19 pandemic, and it pays out up to $2,000 per month.
Asreceive their first payment, financial experts are reminding people that the funds are actually taxable, and you could be required to pay some of it back next year.
Gennaro De Luca, a certified financial planner, explained to Global News that this is a major difference between CERB and traditional EI payments.
As it stands, the COVID-19 funding does not hold back any taxes, which is why applicants can automatically receive $2,000 upfront, he explained.
However, this doesn’t mean that you won’t have to pay tax on the CERB payments, it just means that you don’t have to do it
In fact, De Luca actually recommends saving 20% of each $2,000 payment, if you can afford to.
The amount you’ll have to pay back in taxes depends on how much money you end up making across the rest of the year.
However, it’s important to remember that whatever you claim in CERB payments will be added to your total income at the end of the tax year.
For example, if you made $30,000 from your usual job, but also claimed the maximum benefit of $8,000, your total taxable income would be $38,000.
That said, you may not have to pay anything back at all.
If your total income remains under $12,000 for the year, you won’t be required to pay income taxes at all next year.
Unfortunately, it’s a pretty difficult thing to predict right now, as income prospects are uncertain for many people and there’s no end-date to current physical distancing measures.
That said, if you really want to be prepared, putting 20% of each payment aside is the way to go, says De Luca.
This is because most people's tax rate falls between 15% and 25%, so it’s a good place to start.
However, if you can’t afford to save that right now, don’t worry. This tax bill won’t arrive until April 2021, and there’s a chance that the deadline could still be extended further.
If you are claiming CERB, remember to reapply every month! More information can be found
The relief benefit may have its limitations, but the government has made it a lot easier for you to be considered eligible. Last week,to provide financial aid to even more workers in Canada.
Now, you can qualify for $2,000 if you're a gig worker, freelancer or contractor. You can also get paid if your EI has run out, or if you're still working but earning less than $1,000 a month.
Plus, essential workers that make $2,500 a month will be getting a raise, according to Trudeau.
"For people in all of these situations, we see you, we're going to be there for you, and we're working as hard as we can to get you the support you need," he said on April 15.