CRA Crisis Announcement: Your $2,000 CRB Is Taxable!

Unlike CERB, the CRA is now deducting a 10% tax when it pays the new recovery benefit. A $13,000 CRB equivalent investment in the Canadian Western Bank stock can produce a much-needed income support, too.

| More on:
Person Hands Opening Mailbox To Remove Newspaper

Image source: Getty Images

The Canada Recovery Benefit (CRB) is a net of 10% withholding tax when you receive the money. Your previous Canada Emergency Response Benefit (CERB) was taxable, too, except that you got the gross amount. For CRB, the Canada Revenue Agency (CRA) is deducting the tax upfront in every payment.

CERB is before tax money, while CRB is after-tax money. Both have tax implications. Recipients of both must include the payments as income when filing individual tax returns for the 2020 or 2021 income years.

Your tax bill

The CRA considers CERB as a taxable income. CRB gets the same treatment from the tax agency. But with CRB, the CRA follows the procedure when claiming the traditional unemployment insurance where the government takes a small amount of tax.

Regarding the tax bill when claiming your CRB, the 10% tax withheld at the source may not be all the tax you need to pay. After completing your income tax return, the total tax amount will depend on how much income you earned for the year. Thus, you’re liable for any taxes due on the income. It could be more (or less).

In receiving any amount from CRA-administered COVID-19 benefits, the tax agency will provide all individual recipients with a T4A tax information slip at tax time.

CRB reimbursement

You may earn employment or self-employment income while receiving CRB. However, there’s a limit on how much income, excluding CRB payments, you can keep. If your net income without CRB is over $38,000, you must reimburse the CRA $0.50 of the benefit for every dollar of net income that you earned above the limit.

The CRA clarifies that net income includes CERB, Canada Recovery Sick Benefit (CRSB), and Canada Recovery Caregiving Benefit (CRCB), but not CRB.

Growing and expanding

Assuming you have $13,000 free cash (equivalent to total gross CRB), the money can work for you. Earn extra income by investing in a cheap but super dividend payer. Canadian Western Bank (TSX:CWB) trades at $27.79 per share — almost a 10% discount. The dividend yield is 4.44%. Over the last 20 years, the CWB has returned 668.71%.

You can purchase nearly 468 shares for $13,000. The capital will produce $577.20 in extra income. Hold the bank for 20 years, and your money will compound to $30,994.21. If you want the earnings 100% tax-free, place it in a Tax-Free Savings Account (TFSA).

The seventh-largest bank in Canada has a market capitalization of $2.42 billion and strongest in the country’s western parts. It leads the banking industry in small and mid-sized equipment leasing.  Also, the dividend payouts should be safe and sustainable, given the meagre 34.91% payout ratio.

According to Stephen Murphy, CWB’s executive vice-president, Banking, the boutique bank for business owners is in growth and expansion modes to meet its target market’s full needs.

CRB guide

CRB is available between September 27, 2020, and September 25, 2021, with 13 eligibility periods in all. Each one is a two-week period, and you’ll receive $900 (after taxes) for the period you applied for. There’s no automatic renewal, so you must apply for each period separately.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned.

More on Dividend Stocks

money cash dividends
Dividend Stocks

These TSX Telecom Stocks Are Dialling Up Impressive Profits 

Two telecom stocks are dialing up dividend profits for shareholders while inflation and interest are slowing dividends for some companies.

Read more »

Group of industrial workers in a refinery - oil processing equipment and machinery
Dividend Stocks

2 Top Canadian Energy Stocks to Buy Right Now

Blue-chip TSX stocks like these two Canadian energy sector giants can help you generate substantial long-term wealth growth.

Read more »

edit Safety First illustration
Dividend Stocks

Safeguarding Your Wealth: 5 Safe Stocks to Buy in a Rising Interest Rate Market

Established companies like the Canadian National Railway tend to be relatively safe in tough economic conditions.

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

1 Passive-Income Stream and 1 Dividend Stock for $288 in Monthly Income

It can be hard to invest when you don't have any cash, so create some from this passive-income method and…

Read more »

Dividend Stocks

2023 TFSA Contribution Time: 2 Dividend Stocks to Buy With $6,500

Buy these two great dividend stocks in your TFSA as a part of a diversified portfolio if you haven't already.

Read more »

Construction work on a site
Dividend Stocks

Canadian Infrastructure Stocks: Building the Future and Your Wealth

These two Canadian infrastructure stocks are highly defensive and offer excellent long-term potential, making them ideal for this uncertain market.

Read more »

Dividend Stocks

Dividend Investors: Top Canadian Utility Stocks for June 2023

These three top utility stocks could be excellent buys for income-seeking investors.

Read more »

A tractor harvests lentils.
Dividend Stocks

Why Nutrien Stock Is Still a Great Buy on the TSX Today

Nutrien (TSX:NTR) stock has gone through major ups and downs thanks to outside influences, but its bottom line remains incredibly…

Read more »