More than 8.38 million Canada Emergency Response Benefit (CERB) applications have been processed since mid-March. This figure will only increase as Canadians reapply for the benefit every four weeks. According to a recent survey by Leger, 17% of Canadians have received the CERB, which is a 6% increase over last week.
For now, the government isn’t withholding any taxes at source on those payments. So, recipients are getting the full $2,000 a month. Applicants get $500 a week, in four-week intervals, up to a maximum of 16 weeks. Therefore, if someone were to continue to qualify, they could see $8,000 in CERB payments. However, the benefit is taxable, which means you may have to pay back a percentage when filing your 2020 taxes. But the question is, how much?
When it comes time to file your 2020 taxes, you will get an information slip from the Canada Revenue Agency (CRA) stating the amount of money you received. If you use the CRA My Account portal, you will find this document under “Tax Information Slips (T4 and more).” Otherwise, you will likely get this information in the mail. When the time comes, you can add up the exact totals. In the meantime, you can use an estimate.
To estimate the total amount you will earn during the year, add up the following sources of income:
- CERB payments
- Employment income
- Self-employment income
- Any other sources of income
Next, subtract any tax deductions like RRSP contributions. This figure will help determine which tax bracket your income will fall into, both provincially and federally.
Federal Tax Rates for 2020
|Tax Rate||The portion of Taxable Income||Income amount|
|15%||$48,535||On the first $48,535|
|20.5%||$48,534||Portion over $48,535 up to $97,069|
|26%||$53,404||Portion over $97,069 up to $150,473|
|29%||$63,895||Portion over $150,473 up to $214,368|
|33%||No limit to this amount||Over $214, 368|
The 2020 federal tax rates are as posted by The Canada Revenue Agency.
Provincial and Territorial Tax Rates 2020
|Tax Rate||Taxable Income Amount|
|Alberta||10% on the first $131,220, +
12% on the next $26,244, +
13% on the next $52,488, +
14% on the next $104,976, +
15% on the amount over $314,928
|British Columbia||5.06% on the first $41,725, +
7.7% on the next $41,726, +
10.5% on the next $12,361, +
12.29% on the next $20,532, +
14.7% on the next $41,404, +
16.8% on the amount over $157,748
|Manitoba||10.8% on the first $33,389, +
12.75% on the next $38,775, +
17.4% on the amount over $72,164
|New Brunswick||9.68% on the first $43,401, +
14.82% on the next $43,402, +
16.52% on the next $54,319, +
17.84% on the next $19,654, +
20.3% on the amount over $160,776
|Newfoundland and Labrador||8.7% on the first $37,929, +
14.5% on the next $37,929, +
15.8% on the next $59,574, +
17.3% on the next $54,172, +
18.3% on the amount over $189,604
|Northwest Territories||5.9% on the first $43,957, +
8.6% on the next $43,959, +
12.2% on the next $55,016, +
14.05% on the amount over $142,932
|Nova Scotia||8.79% on the first $29,590, +
14.95% on the next $29,590, +
16.67% on the next $33,820, +
17.5% on the next $57,000, +
21% on the amount over $150,000
|Nunavut||4% on the first $46,277, +
7% on the next $46,278, +
9% on the next $57,918, +
11.5% on the amount over $150,473
|Ontario||5.05% on the first $44,740, +
9.15% on the next $44,742, +
11.16% on the next $60,518, +
12.16% on the next $70,000, +
13.16 % on the amount over $220,000
|Prince Edward Island||9.8% on the first $31,984, +
13.8% on the next $31,985, +
16.7% on the amount over $63,969
|Quebec||15% on the first $44,545,
20% on amounts greater than $44,545, but not more than $89,080,
24% on amounts greater than $89,080 but not more than $108,390
25.75% on amounts greater than $108,390
|Saskatchewan||10.5% on the first $45,225, +
12.5% on the next $83,989, +
14.5% on the amount over $129,214
|Yukon||6.4% on the first $48,535, +
9% on the next $48,534, +
10.9% on the next $54,404, +
12.8% on the next $349,527, +
15% on the amount over $500,000
The 2020 provincial and territorial tax rates are as posted by The Canada Revenue Agency.
For example, if you were to make $40,000 during the year and you received the maximum CERB amount of $8,000, your total taxable income would be $48,000. Your tax liability would depend on which province or territory you live in and the federal tax rate. The federal tax rate on this amount is 15% for 2020. If you live in Ontario, the first $44,740 is taxed at a rate of 5.05%. The remaining $3,260 is taxed at a rate of 9.15%.
Use these tax brackets to determine your marginal tax rate and effectively how much money you may owe in April 2021.
Your Marginal Tax Rate
Using the above example, this is how you can estimate your marginal tax rate.
If your income is $48,000, you will fall under one federal tax bracket and two provincial tax brackets.
To find the marginal tax rate on the first $44,740 of taxable income, you can add up the federal and provincial tax rates.
- Federal tax rate: 15%
- Ontario provincial tax rate: 5.05%
- Marginal tax rate: 15%+ 5.05% = 20.05%
Repeat the calculations for the second tax rate for the remaining $3,260.
- Federal tax rate: 15%
- Ontario provincial tax rate: 9.15%
- Marginal tax rate: 15%+ 9.15% = 24.15%
Use your highest marginal tax rate to estimate the amount you will owe from your CERB payments.
- Monthly CERB amount: $2,000
- Marginal tax rate: 24.15%
- Estimated amount owing: $2,000 x 24.15% = $483
For this example, our taxpayer would owe nearly one-quarter of each monthly CERB payment back in taxes. In this case, the estimated tax amount owing on the full $8,000 would be $1,932.
Additional Tax Considerations
The precise amount you will end up paying will include an array of factors, such as tax credits and tax deductions. For example, taxpayers may be able to claim education tax credits or the Climate Action Incentive, among other deductions.
Or you may not have to pay any income tax at all. The basic amount Canadians can earn tax-free has increased to $13,229. Anyone who makes less than this amount during 2020 won’t owe income tax.
Although it can be quite hard to estimate when you may be returning to work or how much income you will see this year, it is important to prepare for your tax bill financially. As circumstances change, like getting a new job, remember to readjust your tax estimate.
However, the time to file your 2020 taxes is almost a full year away so focus on your current financial obligations and save when you can.
More information on the CERB:
- About the CERB
- Who is Eligible for the CERB Payments?
- How to Apply for the CERB
- When to Apply for the CERB
- Reapplying for the CERB
- Why Might You Have to Repay the CERB?
About the CERB
If you have stopped working because of the COVID-19 pandemic, are in quarantine, or are taking care of others because of the crisis, you may be eligible for financial support from the government. If you qualify, the CERB provides a temporary income of $500 a week ($2,000 a month) for up to 16 weeks.
Who is Eligible for the CERB Payments?
To be eligible for the CERB payments, you must:
- Reside in Canada;
- Be at least 15 years old;
- Have stopped working because of reasons related to COVID-19, or are eligible for Employment Insurance (EI) or sickness benefits, or exhausted EI benefits between December 29, 2019, and October 3, 2020;
- Have had employment income of at least $5,000 in 2019 or the last 12 months before the date of application;
- Have not voluntarily quit your job.
Eligibility for the CERB started on March 15, 2020, and extends until October 3, 2020. However, the application deadline is December 2, 2020. That means you can receive retroactive payments.
How to Apply for the CERB
To apply for the CERB, visit either the Service Canada or CRA website or call their associated phone line.
Online applications can be made through your CRA My Account.
CRA Automated Toll-free Line
The phone lines are open 21 hours a day, every day of the week. Services are closed between 3:00 a.m. to 6:00 a.m. for maintenance.
Service Canada Online
Online applications can be made through the Canada.ca website.
CRA Automated Toll-free Line
The phone lines are open Monday to Friday from 8:30 a.m. to 4.30 p.m.
You will need your Social Insurance Number (SIN) and your postal code to apply. You must also confirm you meet the eligibility requirements by completing a quick survey or declaring you qualify for the benefit over the phone.
When to Apply for the CERB
To manage applications and avoid system errors, the government has asked applicants to follow specific guidelines. Whether by phone or online, applicants have been asked to apply within a particular timeframe based on their birth month.
Best Day to Apply for the CERB
|Birth Month||Day of the Week to Apply for the CERB||The Best Date to Apply|
|January, February, March||Mondays||April 20|
|April, May, June||Tuesdays||April 21|
|July, August, September||Wednesdays||April 22|
|October, November, December||Thursdays||April 23|
|Any month||Fridays, Saturdays, Sundays|
The application date should not impact the amount of money received or the time of payment. Applicants should get their payments within three business days if they have signed up for the direct deposit option. Otherwise, applicants should receive a cheque within 10 business days.
Reapplying for the CERB
If you continue to be affected by COVID-19, you can reapply for CERB payments every four weeks, to a total of 16 weeks. The CERB payments are not automatic, and applicants must reapply to continue to collect the benefit.
Why Might You Have to Repay the CERB?
Applicants who return to work earlier than anticipated or who applied for the CERB but later realized they were not eligible will have to repay the CERB. Applicants can return the original CERB cheque by mail to the Sudbury Tax Centre, or mail repayment to the CRA. Those that signed up for the direct deposit or already cashed the payment would have to choose the latter option.