Canadians will need to repay new unemployment benefits
It turns out that the Canadian emergency unemployment benefit is taxable, which means Canadians will have to pay back a portion of the money they received.
Since the Canadian government launched the Canada Emergency Response Benefit last month, millions of Canadians have applied for temporary financial assistance. While a couple thousand dollars is very helpful right now, it's important to remember that this money may need to be paid back, as the benefit is taxable.
Back in March, Justin Trudeau announced a new benefit of up to $2000 CAD, designed to support those who lost their jobs due to the COVID-19 pandemic.
As millions of Canadians have already received their first payments, financial experts are reminding people that these funds are taxable, and some of it may need to be repaid next year.
Gennaro De Luca, a certified financial planner, explained that there's a big difference between the emergency benefit and traditional unemployment benefits.
Currently, no taxes are being withheld from the $2000 CAD payment, so Canadians may automatically receive the full amount upfront, he explained.
However, this doesn't mean Canadians won't have to pay tax on the benefit at all. It just means they won't have to pay taxes now.
De Luca recommends setting aside 20% of each payment if you can afford to do so.
The amount you'll have to pay back in taxes depends on how much money you earn by the end of the year.
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It's important to remember that the entire benefit amount will be added to your total income at the end of the tax year. For example, if you earned $30,000 CAD from your regular job but also received $8,000 CAD in benefits, your total taxable income will be $38,000 CAD.
You might not have to pay anything back at all. If your total annual income is less than $12,000 CAD, you won't have to pay income tax next year.
Unfortunately, it's quite difficult to predict the exact amount of tax right now, as income prospects are uncertain for many people, and it's not known when the lockdown will end.
However, if you can't afford to set aside 20% right now, don't worry. Taxes won't be due until April 2021, and there's a chance this deadline could be extended.
