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Why do your Taxes go up when you collect Employment Insurance benefits, in Canada?
I know EI contributions are tax deductible since a portion of your earned income goes in to the EI fund, thereby reducing your take-home pay. However, you pay income tax on any EI benefits you collect, just as you would pay income tax off your pay cheque from work.
Also, since EI is separate from your taxes and has its own fund paid for by employees & employers additionally to taxes and other government contributions (like Canada Pension Plan), your tax dollars aren't paying back the EI fund in any way.
So unless there's something I'm missing, I don't understand why your taxes go up either the year you collected EI or the year after, on your next tax return??
1 Answer
- 7 years ago
EI is considered taxable income in Canada and is added to all your other income that year to determine the tax payable. You might also have to pay some of your EI back if your other income that year exceeds certain threshholds. Your Taxable Income for the year is also used to determine your eligibility for all sorts of other government programmes as well both Federally and Provincially.
