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Is CERB taxable? Check out the Tax You Need To Pay On CERB


The tax filing season is here and taxpayers can start to file their tax returns for the year 2020. Before filing your returns, don’t forget to add your CERB benefits. Read on to find out how much tax you need to pay on CERB benefits. Click here to know about the other benefits.

In the past year, the COVID-19 pandemic played havoc with our personal and financial aspects of our life. The unemployment rate increased and to help individuals cope with the pandemic, the Canada Revenue Agency(CRA) had introduced Canada Emergency Response Benefit (CERB) where people received $500/week for a 26-week period. If you received the maximum benefits, i.e. for 28 weeks, you would have received a total amount of $14,000.

However, you need to keep in mind that the amount was not taxed at source and you need to add the benefits as a part of your net income while filing your income tax.

Tax Rate on CERB

The tax rate on CERB will depend on your overall earnings in the year 2020. You can calculate your CERB tax bill by considering your federal and provincial tax rate.  

 Here’s the current federal tax rate:

  • 15% on the initial $48,535 of taxable income
  • 20.5% on the taxable income over $48,535 up to $97,069
  • 26% on the taxable income over $97,069 to $150,473
  • 29% on the portion of income over $150,473 up to $214,368
  • 33% of taxable income over $214,368

You can check the provincial tax rates here. If the CERB benefit was your only income in 2020, your taxes may be negligible to nil. It is because you can claim tax benefit up to $13,229 on federal basic personal amount plus other deductions you can qualify.  

Let us consider a simple example to calculate your tax on CERB benefits. Let us assume you live in Ontario and you earned $50,000 last year as a salary income. Additionally, you received a CERB benefit of $8,000 that takes your total income to $58,000.

Now, the federal tax and provincial tax will apply on this income.

The federal tax rate on the initial income of $48,535 is 15% and 5.05% is the Ontario’s provincial tax rate is for the first $44,740. So, your cumulative tax rate for initial $44,740 is 20.05% i.e., $8,970.37.

For the succeeding $3,795, the federal tax will be 15% and Ontario’s tax will increase to 9.15%. Here, you will have to pay $916.5 in taxes.

For the rest of the income of $9,465, the federal tax and provincial tax is 20.5% and 9.15% respectively. So, the tax rate for the remaining amount will be 29.65%. This means that you have to pay a tax of $2,806.37, bringing the total amount of tax for the income of $58,000 to $12,693.24.

So, don’t forget to consider your CERB before filing your taxes this year.

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