Today, the Department of Finance published draft legislative proposals to temporarily adjust the treatment of certain deductions with respect to regular Employment Insurance (EI) benefits, including EI special benefits, in order to align with how those deductions are treated for the Canada Emergency Response Benefit (CERB) and other federal COVID-19 emergency income benefits.
Under the current tax rules, EI and CERB income are treated differently when determining tax relief under the Child Care Expense Deduction and the Disability Supports Deduction. EI recipients are not able to deduct eligible expenses against their EI income, whereas CERB and other COVID-19 emergency income recipients can. The proposed changes would amend the Income Tax Act to temporarily allow Canadians receiving EI benefits to make the same claims for the Child Care Expense Deduction and Disability Supports Deduction as COVID-19 income support recipients. This change applies to income for 2020 and 2021. The proposal also applies to recipients of Quebec Parental Insurance Plan benefits. This change would ensure fair income tax treatment for all recipients of federal income support during the pandemic.
The Child Care Expense Deduction allows child care expenses to be deducted from income, subject to some limitations, when those expenses are incurred in order to earn employment or business income, pursue education, or perform research.
The Disability Supports Deduction provides tax relief for individual taxpayers who have paid for certain disability-related supports in order to earn employment or business income, pursue education, or perform research.