Taxes on EI benefits in 2026: what is withheld and when you repay
EI is gross income. Plan for the tax withheld every two weeks, and for the repayment if the rest of your year was well paid.
Updated on · Mottalib Radif · Editorial policy
Withholding at source
Every EI payment has federal and provincial income tax deducted, based on your province of residence and claim code. Because the tables assume EI is your only income for the year, the deduction is modest: roughly 10% to 15% of the benefit. Someone who worked six months at a good salary before the claim will usually owe a balance in April. You can ask Service Canada to withhold more.
| Weekly benefit | Indicative withholding | Net deposit (approx.) |
|---|---|---|
| $400 | $40–55 | $345–360 |
| $550 | $60–80 | $470–490 |
| $729 | $85–110 | $620–645 |
The claim code is the set of personal tax credits you declared on the TD1 form when you applied, usually claim code 1, the basic personal amount only. Service Canada uses the same payroll deduction tables as an employer, applied to the two-week payment as if it were a regular pay. The result is that a claimant on the maximum benefit of $729 is treated as someone earning about $37,900 a year, whose average tax rate is low. When the year also contains twenty weeks of salary at $1,500 a week, the true marginal rate on the benefits is higher, and the April balance reflects the difference. The fix is either an additional withholding request or a quarterly instalment set aside.
The T4E slip and the return
By the end of February, Service Canada issues a T4E showing the total benefits paid in the calendar year in box 14, the income tax deducted in box 22, the benefit repayment rate in box 7 and, where applicable, the amounts repaid or the overpayments recovered. Regular and special benefits are combined in box 14 but identified separately in boxes 15 to 21, because only regular benefits are subject to the repayment. The total goes on line 11900 of the federal return, the tax withheld on line 43700. Quebec residents also receive a Relevé 6 for the provincial return. An amount you repaid to Service Canada during the year because of an earlier overpayment is deductible on line 23200 if it relates to a previous year.
The benefit repayment (clawback)
At tax time, claimants whose net income exceeds 1.25 × maximum insurable earnings (1.25 × $68,900 = $86,125 for 2026) repay 30% of the lesser of: the regular benefits received, or the amount of net income above the threshold. Example: net income $96,125, regular benefits $8,000 → repay 30% × min($8,000; $10,000) = $2,400.
Exempt: maternity, parental, sickness, compassionate care and family caregiver benefits, and anyone who received no regular benefits in the ten previous years.
| Net income for the year | Regular benefits received | Excess over threshold | Repayment (30% of the lesser) |
|---|---|---|---|
| $81,125 | $10,000 | $0 | $0 |
| $90,125 | $10,000 | $4,000 | $1,200 |
| $98,125 | $10,000 | $12,000 | $3,000 |
| $116,125 | $6,000 | $30,000 | $1,800 |
| $98,125 | $10,000 (first claim in 10 years) | $12,000 | $0 |
Net income for the repayment is line 23400 of the return, before the deduction for the repayment itself, and it includes the EI benefits. A worker laid off in October after nine months at $110,000 who collects $7,000 of EI before year end has a net income around $89,000 and repays 30% of the smaller of $7,000 and the $2,875 excess: $863. The same worker laid off in March, with $22,000 of salary and $20,000 of EI, is far below the threshold and repays nothing. The repayment is calculated on the return, as a social benefits repayment on line 42200, and the amount repaid is deductible on line 23500 so that it is not taxed twice. First-time claimants are exempt only if they received no regular benefits in the ten taxation years before the year of the claim; a claim eleven years ago does not count.
Timing tricks that do not work, and one that does
Because the test is annual net income, some claimants try to shift income across years. Severance paid as a lump sum cannot be split, and Service Canada allocates it to weeks anyway. RRSP contributions, on the other hand, reduce net income for the repayment test as well as for tax: a claimant projecting a net income of $90,000 who has $5,000 of RRSP room can bring the income below the threshold and eliminate the repayment, which for $10,000 of benefits is worth $1,163 on top of the ordinary tax saving. Transferring a retiring allowance to an RRSP has the same effect. Pension income splitting with a spouse can also lower the individual net income used for the test.
Other deductions
No CPP or EI premiums are deducted from EI benefits. Union dues, pension contributions and group insurance stop with employment. Provincial health premiums (Ontario, Quebec) are settled through the tax return.
Debts to the Crown can be recovered from benefits: an earlier EI overpayment is recouped at up to 50% of each payment, and an outstanding income tax debt can be set off by the CRA. Family support orders registered with a provincial maintenance program are garnished from EI at the same rates as from wages. Provincial social assistance received while waiting for the EI decision is repaid to the province from the first EI payments under an assignment you sign at the time. None of these are taxes, but all of them reduce the deposit.
Planning the year
- Estimate your total income for the year: salary to date, severance, EI, any new job. If it approaches $$86,125, budget for the repayment or use RRSP room.
- If you had salary before the claim, request additional withholding on EI, or set aside 10% of each payment.
- Keep the T4E and the T4 from the former employer; check that the severance was reported in the year it was paid.
- Claim the deduction for any EI overpayment you repaid, and for union dues and moving expenses if you relocated for a new job.
- Use the calculator for the gross weekly benefit and the total over the claim; the tax depends on your province and the rest of your year.
