This is how much tax you'll need to pay on CERB in Canada
How much tax will you need to pay on CERB? Well, that depends on a variety of factors, including how much money you make in 2020, which province you live in, and how much money you claimed from the benefit.
First, let's recap what exactly the benefit is.
The Canada Emergency Response Benefit (CERB) is a taxable benefit for eligible people who have lost their income as a result of the pandemic; you can claim $2,000 each month for up to six months.
Unlike with a typical paycheque, CERB payments don't have taxes taken off the top, which means you'll likely be expected to pay part of each $2,000 payment back to the government in April.
QUESTION➡️ Is the #CERB Taxable?— Canada Revenue Agency (@CanRevAgency) April 16, 2020
ANSWER ➡️ Yes. Although income tax will not be deducted at source, you must report these benefit payments as income on next year’s tax return. #CdnTax
Find out more at https://t.co/g8YQWw8rwV pic.twitter.com/UduXLZB067
Let's start with the good news; some people probably won't have to pay anything back at all.
For example, if you're making less than $13,229 each year (the basic personal exemption for federal taxes), then you won't owe federal income taxes.
Similarly, if your only income in 2020 is CERB and you claim the full $12,000, then you won't owe anything in Alberta, Quebec and Saskatchewan, per HuffPost Canada.
Most people, however, will have to pay taxes on CERB when April rolls around, and tax rates could vary drastically.
Friendly reminder if you are receiving that $2000 from 🇨🇦 CERB, that money is not tax free! Make sure to save about $400 of each payment for taxes next year.— Kayla Ⓥ🇧🇧 (@kumquat_kayla) April 8, 2020
To calculate your own individual tax rate, you'll need to know the following:
After that, you can use an online tax calculator to figure out how much you're likely to owe in taxes.
Let's consider some examples.
Sarah, an Ontario resident, earned $6,000 until March, when she was laid off. She expects to collect $12,000 in CERB for 2020, bringing her estimated income to $20,000.
She should therefore set aside 20 per cent (or $2,400) of her $12,000 CERB to cover her tax liability. If she expects to be re-hired in the autumn, she should set aside slightly more.
PSA to all those who are receiving the $2000 CERB benefit: it is untaxed. Which means you will have to pay taxes on it in 2021. The majority of you are likely in the lowest tax bracket of 20.05% which means that $2000 is really $1600! Save that $400 for next year to pay it back:)— CJ (@chaneljanssen) April 8, 2020
Ben, a Nova Scotia resident, is a working professional who expects to earn $50,000 in 2020. He was furloughed for a few months and claimed $4,000 in CERB during that time before returning to work, bringing his estimated income to $54,000.
Ben will therefore need to set aside about 43 per cent ($1,720) of his $4,000 CERB to cover his tax liability.
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