Budget 2021: Tax treatment of pandemic benefit repayments

Millions of Canadian taxpayers received pandemic benefits during the 2020 taxation year. While most such recipients were entitled to those benefits, there were instances in which the benefits were paid in error and had to be repaid.

All such pandemic benefits were required to be included in income in the year in which they were received, but individuals who repaid benefits were entitled to claim a deduction from income equal to the amount repaid. Under current rules, however, the repayment deduction can only be claimed in the year in which the repayment was made, which in many instances would not be the same taxation year in which the benefit was received.

The Budget proposes a change to that rule, such that individuals would be entitled to claim a deduction for amounts repaid in the same taxation year that the benefit was received, rather than in the year of repayment.

The change is effective for all repayments made before 2023, for benefits received under the following programs: the Canada Emergency Response Benefit, the Canada Emergency Student Benefit, the Canada Recovery Benefit, the Canada Recovery Sickness Benefit, and the Canada Recovery Caregiving Benefit.

For more budget information, please click here.