CRA & Revenu Québec

How Does Unemployment Affect Your Taxes?

As of January 2017, approximately 570,000 Canadians received Employment Insurance (EI) payments. Whether it’s due to the arrival of a baby, seasonal work changes, or layoffs, many Canadians will at some time in their life claim EI. Employment Insurance payments are taxable income, and as such, they affect your taxes just like any other type of income, and in some cases, you may have to repay these benefits.

Repayment of Benefits

As of 2017, if you receive Employment Insurance payments and your net income for the year exceeds $64,125, the Canada Revenue Agency requires you to repay 30 percent of your net income over the threshold. However, if that amount exceeds the total amount of benefits you earned, you only need to repay the amount of benefits you received.

For example, if your net income was $74,125 during a year in which you earned EI benefits, you earned $10,000 over the threshold. As a result, you must repay $3,000, or 30 percent of $10,000. However, if you only received $2,000 in benefits, you would only repay $2,000.

Exceptions to EI Repayment Requirements

In some cases, you may earn above the threshold and still not be required to repay any of your benefits. Most significantly, if you have not earned any EI income during the 10 previous years, you do not have to repay any of your benefits.

For example, if you report EI payments for the 2017 tax year and have not reported EI payments for any of the 10 previous years, you do not have to repay any of your EI payments, regardless of how high your income.

However, if you reported EI payments in any year between 2006 and 2016, as well as 2017, you are required to repay a portion of your benefits if your net income exceeds the threshold.

Note on Special Benefits

The EI repayment requirement only applies to regular benefits including regular fishing benefits. It does not affect special benefits such as maternity, sickness or Parents of Critically Ill Children benefits. If you receive only special benefits, you do not have to worry about repaying benefits if your net income surpasses the threshold. Similarly, special benefits received in the previous decade do not trigger the repayment requirement.

If you receive both special benefits and regular EI benefits in the same year, you may be required to repay a portion of your regular benefits.

For example, if you received both unemployment and maternity benefits in 2017, your net income for that year was over $64,125 and you received regular EI benefits in one of the 10 previous years, you would be required to repay a portion of your benefits. However, you would only be required to repay regular benefits rather than special maternity benefits.

Child Care Expenses Deduction and Unemployment

You may write off the cost of childcare expenses on your taxes, and this does not change even if you are unemployed. There is no expectation to withdraw your children from care simply because you are not working. In fact, one of the provisions of receiving EI is that you are seeking work and ready to start, conditions that may be hard to meet if your children are withdrawn from care.