Don't spend it all: CERB recipients will owe income tax on it next year

What to do if you received double benefit payments Employment Minister Carla Qualtrough explains what steps Canadians should take if they received double benefit payments.

TORONTO — The Canada Emergency Response Benefit (CERB) provides Canadians whose jobs have been affected by the COVID-19 pandemic with money to get by.

For up to 16 weeks, the federal government will provide those accepted for CERB with $500 per week.

And then next year, they'll take some of it back.

This caveat has not been widely promoted since CERB was announced in March and launched earlier this month. It is, however, mentioned in a question-and-answer section on a government website set up for the benefit.

"The Benefit is taxable – you will be expected to report it as income when you file your income tax for the 2020 tax year," the page reads.

Unlike most standard paycheques, CERB payments do not have income tax deducted before they are sent out.

The federal government has set the lowest tax rate for 2020 at 15 per cent. Anyone who earns $48,535 or less in total income for the year will owe tax on their CERB monies at that rate. A recipient who earns the maximum benefit of $8,000 will have to repay $1,200 at tax time.

On top of this, there are wildly varying provincial and territorial income tax rates. The provinces and territories also set tax brackets at different levels of income.

The Nunavut government will take the least out of a low-income-earner's CERB payments – an additional $320 for a recipient who receives the full $8,000 and earns less than $46,278 in total during 2020. At the other end of the spectrum, a Quebecer who receives the same benefit and earns less than $44,545 this year will owe their province another $1,200 in taxes on their CERB.

In the other most populous provinces, an Ontarian earning less than $44,741 will owe $404 more on an $8,000 benefit, a British Columbian with income of $41,725 or less will owe an additional $404.80, and an Albertan will have to pay an extra $800 if their income is $131,220 or less.

However, these amounts may not be prominent when you file your taxes next year. The exact balance owed by or to any individual is based on the complicated interplay between all their income and deductions. For example, somebody who earns enough to qualify for CERB but less than the basic personal amount – which the government is looking to raise from $12,069 to $13,229 – will not have to pay any income tax on their CERB payments.

More than 6.8 million unique applications for CERB had been received as of Tuesday, according to a government tracker.