Government’s $38,000 clawback threshold for CRB repayment refers to net income and can be offset by RRSP contributions.
For many Canadians, the tax system is more confusing than ever this year because of the various COVID-19 aid programs. A question from a reader about his personal situation illustrates how having multiple income sources in a single year can complicate the tax picture. It leads off this week’s selection of reader questions.
Q: I am self-employed and collected CERB (Canada Emergency Response Benefit) for six months, then transferred to CRB (Canada Recovery Benefit) for three pay periods. I know that if you reach $38,000 (for the year), you will be taxed 50 per cent on the CRB for each dollar above $38,000. What is considered income in that calculation? I am collecting both my federal (Old Age Security) and provincial (Quebec Pension Plan) cheques — $614 a month from Ottawa, $970 from the province ($843 after taxes). Are they included in the $38,000 plateau?
A: They are. In fact, all income except CRB itself is part of the calculation. With more than $19,000 from the pensions and $12,000 from CERB, you aren’t far off the $38,000 clawback threshold already. The key variable here is your self-employment income before the lockdown and after. If it exceeds $7,000, you are in the payback zone. And 50 per cent isn’t the tax rate, it’s simply the benefit repayment. You’ll be taxed as well on any amount that isn’t repayable. There is one option, though, if you have RRSP contribution room. Because the pivotal $38,000 is net income, you can use an RRSP contribution to bring down your total income below the threshold. Even then, it appears you’ll still owe both governments money, because only minimal amounts were withheld for tax on your QPP and CRB payments, and nothing at all on OAS or CERB.
Q: I live in the Montreal area where I have a home, but I work in Ottawa, so I maintain an apartment there for when I need to be at the office, typically about 10 to 15 days a month. Is there any way I can deduct the Ottawa residence from my taxes?
A: Not under current rules. “Employment deductions regarding homes are limited, such as the workplace-in-the-home deductions, which I don’t see the reader qualifying for as he is using the apartment for living while in Ottawa, not working,” said Nick Moraitis, partner at accounting firm FL Fuller Landau LLP. If it was a temporary posting at your employer’s request and you were compensated for the cost of maintaining a second residence, that money would not be taxable, Moraitis noted. But as things stand, you’re making a personal choice.
Q: I understand that moving expenses are tax-deductible if I move at least 40 kilometres closer to a new employer or work location. But would it also apply if I move closer to a job I already have?
A: Usually not. A move closer to a job and employer you already have generally is considered a matter of individual choice rather than an “eligible relocation.” But there are exceptions, for instance when someone is transferred, or when new responsibilities at the current job cannot be assumed otherwise. In that case, tax departments may want to see a letter of explanation.
The Montreal Gazette invites reader questions on tax, investment and personal finance matters. If you have a query, please send it by email to Paul Delean at email@example.com