The Canadian government has been among the most active in providing relief to its most vulnerable citizens to combat the effects of the COVID-19 pandemic that has decimated global economies and left millions unemployed. The Canada Emergency Response Benefit (CERB) is undoubtedly a novelty in terms of programs that countries have introduced to help people.
With over $150 billion having been distributed already, the CERB is a costly program. The Canada Revenue Agency (CRA) was initially delegated to distribute the funds for 16 weeks. The program entailed distributing $500 per week for up to 16 weeks. Many of the earliest applicants will see their CERB period expire in July.
Economies across the country have started to open up again, and travel restrictions are easing up. However, with millions of unemployed, finding jobs will take a long time. To the relief of many, the government announced an extension of eight more weeks to the CERB program.
The up to $2,000 per month can keep rolling in for Canadians without income during the pandemic. The government’s response indeed has been generous because Canadians might not have had the means to navigate the pandemic without catering to their basic needs without CERB. The benefit certainly helped lessen the financial burden on people.
Of course, not everything is fantastic about CERB.
Many people receiving CERB money might not be aware of the fact that it is a taxable benefit. The CRA is distributing the full amount without deducting taxes. It means the CERB money you receive will contribute to your taxable income when the 2021 tax season arrives. If you have collected CERB and are planning to continue collecting it, you might want to save up for the tax.
Many people took unfair advantage of the benefit and applied for the benefit without being eligible to receive it. The CRA approved applications quickly to ensure that the most vulnerable people received the benefit without wasting time. The CRA is aware of the ill-received benefit cases and is now taking measures to validate claims and follow up with fraudulent applicants.
Some people collected CERB money without the knowledge that they don’t qualify, but they will also come under the radar of CERB fraud.
I recommend avoiding CERB money despite the program’s extension in favour of creating a passive income stream of your own.
Alternative to CERB
You can create a tax-free passive income source through your Tax-Free Savings Account (TFSA). Consider building a portfolio of income-generating assets in your TFSA so you can grow your wealth in the TFSA and earn a substantial amount that can serve as a better alternative for CERB without expiry dates, qualification issues, or taxes of any kind.
Fortis belongs to the utility sector. In times of stable markets, it is a dull stock that does not outgrow the broader market. However, dull and reliable companies like Fortis are excellent picks for any portfolio during times of uncertainty. The massive $23.79 billion market capitalization company provides an essential service that has to keep running no matter how bad it gets.
Primarily providing electric utilities and gas, most of Fortis’ income is predictable and reliable. At writing, the stock is trading for $51.24 per share and pays its shareholders with a decent 3.73% dividend yield.
While the CERB extension seems exciting for many, you can benefit more through a passive income stream of your own that will not expire like the CERB or leave you worrying about taxes.
Building a tax-free income portfolio through your TFSA could be the perfect way to relieve CERB worries. Fortis makes an excellent pick to begin building such a portfolio.
Speaking of tax-free income…
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Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends FORTIS INC.