Maternity & Parental Leave Tax Guide

Types of Leave Benefits

EI Maternity Benefits

• Duration: 15 weeks
• Rate: 55% of average insurable earnings
• Maximum: $668/week (2024)
• Who: Birth mother only
• When: Up to 12 weeks before due date

EI Parental Benefits - Standard

• Duration: 40 weeks (35 to one parent)
• Rate: 55% of earnings
• Maximum: $668/week
• Who: Either parent, can share

EI Parental Benefits - Extended

• Duration: 69 weeks (61 to one parent)
• Rate: 33% of earnings
• Maximum: $401/week
• Same total amount, spread longer

Quebec Parental Insurance Plan (QPIP)

• Quebec has its own program
• Higher benefits than EI
• Different duration options
• Also taxable

How Benefits Are Taxed

Tax Withholding

• Tax withheld at source by Service Canada
• Based on estimated annual income
• May not be enough if you have other income
• Can request additional withholding

T4E Slip

You'll receive T4E showing:

• Box 14: Total benefits
• Box 22: Tax withheld
• Box 20-21: Benefit codes

Where to Report

• Line 11900: EI benefits
• Added to other income
• Taxed at your marginal rate

Employer Top-Up Payments

How Top-Ups Work

• Employer supplements EI benefits
• Often to 93-100% of salary
• Common in public sector, some private
• Usually requires return-to-work commitment

Tax Treatment

• Top-up is employment income
• Reported on T4 slip
• Tax withheld by employer
• CPP/EI deductions apply

Year-End Considerations

Leave spanning two years means:

• Income split between years
• May result in lower overall tax
• Or could push into higher bracket one year

Canada Child Benefit Impact

Lower Income = Higher CCB

• CCB based on previous year's income
• Year on leave = lower income
• Following year = higher CCB payments
• Significant benefit for many families

Example

• Normal income: $80,000
• Leave year income: $45,000
• CCB increase: Potentially $100+/month more

Standard vs Extended: Tax Implications

Standard Option (40 weeks at 55%)

• Higher weekly amount
• May stay in higher bracket
• Shorter lower-income period

Extended Option (69 weeks at 33%)

• Lower weekly amount
• May drop to lower bracket
• Longer period for CCB calculation
• Same total amount

RRSP Considerations

Contribution Room

• EI benefits don't generate RRSP room
• Employer top-up does create room
• Lower income year = deduction worth less
• Consider delaying RRSP deduction

Strategy

• Contribute during leave
• Carry forward deduction to higher-income year
• Maximum benefit when you return to work

Sharing Benefits Between Parents

Parental Sharing Benefit

• 5 extra weeks if both parents take leave
• 8 extra weeks for extended option
• Encourages shared parenting
• Tax impact depends on each parent's income

Tax-Efficient Sharing

• Consider each spouse's income/brackets
• Higher earner may benefit from time off
• Or lower earner takes more to minimize tax
• Balance with career considerations

Self-Employed Parents

EI Special Benefits

• Self-employed can opt into EI
• Must register at least 12 months before claim
• Pay both employee and employer premiums
• Benefits then available

Without EI

• No EI benefits available
• Plan for income replacement
• TFSA savings useful
• Business income may continue

Tax Planning Tips

Before Leave

• Maximize RRSP if in high bracket
• Use up TFSA room
• Consider timing of leave start

During Leave

• Track all childcare expenses
• Keep medical expense receipts
• File taxes promptly for CCB

Returning to Work

• Childcare expenses now deductible
• Update direct deposit for benefits
• Review tax withholding amounts

Common Questions

Can I work while on leave?

Limited work allowed without reducing benefits. Check Service Canada rules.

What about CERB/COVID benefits?

Different programs with different rules. CERB was taxable with no withholding at source.

Do benefits affect OAS/GIS?

Only relevant for seniors. Maternity/parental benefits count as income but no clawback.