Tax Treatment of COVID-19 Benefit Amounts

If you receive a COVID-19 benefit (CERB, CESB, CRB, CRSB or CRCB) that you are required to repay, the benefit amount must be included in your income in the year it was received. When you repay the benefit amount, you can only deduct it in the year the repayment takes place.

The proposed change will allow individuals who repay the COVID-19 benefits that they were not entitled to receive before January 1, 2023, to choose whether to claim the deduction on the return for the year they made the repayment or on the return for the year they received the benefits. Individuals may also split the deduction between those two returns, as long as the total deduction does not exceed the amount repaid.

In certain situations, individuals may have received COVID-19 benefits in error. The amounts received in error must be included in the individual’s income in the year they were received, but could only be deducted in the year of repayment, which can result in unintended tax consequences for some taxpayers. Furthermore, many federal and provincial benefits and credits are impacted by an individual’s net income from a previous year. The proposal would address these consequences by allowing the individual to choose whether to claim a deduction on their return for the year of the repayment or on their return for the year they received the benefit (see examples below). 

After December 31, 2022, if you repay 2020 or 2021 COVID-19 benefits that you reported as income, you can only claim a deduction for the amount repaid in the year of the repayment.

If you enter into a payment arrangement with the CRA before January 1, 2023, to repay a COVID-19 benefit later (e.g. in 2023), the amount repaid after December 31, 2022 can only be deducted on the return for the year of repayment, and not on the return for the year that you received the COVID-19 benefit in error.

The proposed change only applies to repayments of COVID-19 benefits made before January 1, 2023. 

The amount you repaid in a year is usually shown on your tax slip. For example, if in 2021, you repay the CERB you received from the CRA in 2020, you will receive a T4A slip for 2021 indicating the amount repaid.

The CRA will introduce a repayment code on the T4A slip to report federal COVID-19 benefit amounts that were repaid in a different tax year than when they were received. ESDC will also introduce a method for individuals to identify the amount of CERB paid by ESDC that was repaid in the year.

The amount that you can deduct in a year will be the total of:

• the amount that you have repaid 
• minus, any amounts repaid that you have already deducted on a return.

You may request a reassessment prior to receiving your tax slip provided you are able to properly support the amount you repaid. See How do I claim the deduction in 2020? for more information.

What's new
If you received your CERB from Service Canada, the amount repaid will be reported on your T4E slip along with other employment insurance (EI) amounts repaid. Service Canada will send you a letter showing the amount of CERB you repaid in the year.

If you make repayments in 2021 of benefit amounts received in 2020 prior to filing your 2020 return, you can claim the deduction on line 23200 of your 2020 return. If your 2020 return has already been filed and you make your repayments of benefit amounts received in 2020 anytime in 2021 or 2022, you can request a reassessment of your 2020 return to include the deduction.

For information on requesting a reassessment see how to change a return.

In order to claim a deduction for amounts repaid, you will need to provide the following information for each repayment: 

• date and amount of repayment,
• method of repayment,
• to whom the repayment was made (e.g. CRA, Service Canada),
• name of benefit being repaid (e.g. CERB), and
• year of overpayment.

If you are filing your return or your request for adjustment by paper, this information should be included with your return or your request for adjustment. If you are filing your return electronically or are submitting your request for adjustment electronically through My Account or ReFILE, you must keep the documents and information in case we ask to see them.  

When you completed your return, the repayment calculated for line 23500 was deducted from income (so you didn’t pay tax on that amount) and then it was added at line 42200 in the calculation of your total payable. The new rules do not apply to you because you already received a deduction on line 23500 of your 2020 return for this repayment.

However, if you were not eligible for all of the CRB you received, the CRA may need to change your return to recalculate the amounts on lines 23500 and 42200 once it has been determined that you need to repay some or all of the CRB you received. 

If you repay amounts in the same year they are received, generally the amount shown on the tax slip you receive for that year will have been reduced already by the amount of the repayment. You will only report as taxable income on your return the amount shown on the tax slip as income. Therefore, you cannot claim a further deduction.

The CRA provides the latest information on the proposed changes on Canada.ca. Taxpayers should check online regularly for updated forms, policies, guidelines, questions and answers, and guidance.

In the meantime, please consult Finance Canada's Budget 2021 documents for details.