The loss of a job is one of the toughest situations one could ever have to deal with in life. The uncertainty in today’s political environment has many Canadians on edge. From an income tax perspective, here is how job loss could affect your situation.
- Employment income will probably be lower
- If you only worked part of the year, your total income may be lower.
- This could place you in a lower tax bracket, which means:
- You might pay less income tax overall.
- You could be eligible for higher government benefits (e.g., GST/HST credit, Canada Workers Benefit).
- Employment Insurance (EI) Benefits
- If you received EI, those payments are taxable income.
- You'll get a T4E slip from Service Canada.
- The government usually withholds some tax, but often not enough, so you might owe tax when you file, especially if you had no other deductions.
- If you received EI, those payments are taxable income.
- Job search and work transition costs
- Some expenses related to job loss or transition might be deductible, such as:
- Moving expenses (if you moved to take a new job, over 40km closer)
- Union dues or professional fees (if you kept memberships)
- RRSP withdrawals – taxable but may be strategic depending on your situation
- Some expenses related to job loss or transition might be deductible, such as:
- RRSP contributions could help
- If you were laid off and had a severance, you could:
- Contribute some to your RRSP to reduce taxable income.
- You’ll get a tax deduction for that contribution.
- If you were laid off and had a severance, you could:
- Severance or vacation payouts
- If your employer gave you a lump sum payout for vacation or severance:
- That amount is taxable, and you’ll get a T4 slip for it.
- You can sometimes transfer it to an RRSP to reduce the tax hit (especially if you have contribution room).
- If your employer gave you a lump sum payout for vacation or severance:
- Consider benefits or credits you may qualify for
- With lower income, you might now qualify for:
- GST/HST Credit
- Canada Workers Benefit (CWB)
- Canada Child Benefit (CCB)
- Provincial programs (e.g. Ontario Trillium Benefit)
- With lower income, you might now qualify for:
Don’t procrastinate, contact our office so we can help you. We can estimate your taxes with or without EI or severance and build a strategy using RRSPs or other deductions. We can also check which benefits you might now qualify for.
In times of trouble, we are here to work with you as you work to get back into the workforce. Do not hesitate to contact our office for assistance