Article May 6, 2020

Taxable or not? An overview of tax rules for COVID-19 measures

David Truong, CIWM, F.Pl., M.Fisc., National Bank, Private Banking 1859

The past few weeks have been tough for a lot of people, especially health care workers. We can only hope that things will go back to normal soon for everyone. To support taxpayers affected by the financial impact of COVID-19, governments have announced various measures.

Overviews of these measures are easy to find online, so I’m going to outline the tax rules that apply to individuals. In general, benefits based on family income from the previous year are not taxable.

Canada Emergency Response Benefit (CERB): Taxable

In a nutshell, the CERB is a monthly, taxable benefit of $2,000 for up to four months for Canadians who have lost their job, are sick, quarantined or taking care of someone with COVID-19. The CERB is also available to parents who have had to stop working to look after children who are sick or whose school or daycare is closed.

If you are not eligible for the CERB—because you have been retroactively rehired by an employer using the wage subsidy, for instance—and have received payments, you have to repay that money to the federal government. A notice of overpayment will be sent by the Canada Revenue Agency or by Employment Insurance. No penalty or interest will be applied.

Canada Emergency Student Benefit (CESB): Taxable

The CESB provides $1,250 to students returning to school in September and those who graduated after December 2019. Students who have a job but make less than $1,000 per month can also receive the benefit.

However, students must attest that they are unable to find work despite their efforts.

Temporary Aid for Workers Program (PATT): Taxable at the federal level only

The PATT was launched on March 16, 2020, to offer financial assistance to meet the needs of workers who, because they were in isolation to control the spread of the COVID-19 virus, could not earn all of their work income and were not eligible for another financial assistance program.

The lump sum granted to eligible persons was $573 per week for a period of 14 days of isolation. The coverage period could be extended to a maximum of 28 days if the eligible person’s health condition warranted it. If you received payments, the amount is only taxable at the federal level.

To prevent program duplication, given that the Canada Emergency Response Benefit (CERB) is available to the majority of workers eligible for the PATT, the program ended on April 10, 2020.

Canada Child Benefit (CCB): Tax-free

The CCB is a tax-free benefit to help families with the cost of caring for their children. This benefit varies depending on the number of children, their ages and the family income.

For the 2019–2020 benefit year only (July to June), the maximum benefit will be increased by $300 per child, regardless of age: from $6,639 to $6,939 for children under six, and from $5,602 to $5,902 for children aged 6 to 17. The extra amount is based on the family income for 2018 and starts to phase out when it is over $31,120. The amount will be added to the May 20, 2020, CCB payment.

For example, a family with a child under six would have had to have a family income in 2018 of $195,476 to not receive the CCB. With the extra $300, this threshold is increased to $204,851.

GST/HST credit: Tax-free

The GST/HST credit is a tax-free amount paid to Canadians with low and modest incomes to offset the goods and services tax / harmonized sales tax they pay. This credit varies depending on the number of children, their ages and the family income.

The maximum amounts for the 2019–2020 benefit year only (July to June) will increase as follows:

  • $443 to $886 if you’re single
  • $580 to $1,160 if you’re married or in a common-law union
  • $153 to $306 for each child under the age of 19 (excluding the first eligible child of a single parent)
  • $290 to $580 for the first eligible child of a single parent

However, the benefit starts to phase out when the family income for 2018 exceeds $37,789. Canadians who normally receive the credit will have their benefit increased, but not necessarily doubled, due to the way it is calculated. Those who did not receive the credit before may receive an amount.

For example, your family income for 2018 would have to have been below $52,449 to receive the GST/HST credit if you have a child under 19 years of age. This threshold has been increased to $67,109.

Canada Student Service Grant: Clarification to come

To encourage students to participate in the COVID-19 response, the government is creating the Canada Student Service Grant, which will provide up to $5,000 to help post-secondary students pay their education costs in the fall. We don’t yet know whether this grant will be taxable.

The amount will vary depending on the number of hours dedicated to volunteer work to fight COVID-19 this summer. The grant will be paid to students when they return to school in the fall.

Allowance paid by employers to employees to equip themselves for telework: Taxable

While such expenses are generally taxable, they may not be if an expense is justified by an invoice submitted by the employee. For example, in the context of the COVID-19 crisis, the Canada Revenue Agency (CRA) may, in certain situations, accept that a reimbursement of an amount not exceeding $500 for the purchase of personal computer equipment is primarily for the benefit of the employer.