When you take parental leave in Canada, your tax situation changes in several important ways. Employment Insurance (EI) parental benefits are taxable income that you must report on your tax return, but you may qualify for a non-refundable federal caregiver amount credit. Your employer may also continue to deduct CPP contributions and income tax from your benefits depending on your agreement. Understanding these changes helps you avoid surprises at tax time and plan your finances for 2026. Parental leave in Canada typically involves two income sources that affect your taxes differently: Employment Insurance (EI) Parental Benefits - These are fully taxable income - You receive a T4E slip showing the amount - Report this on line 11900 of your tax return - The CRA will withhold tax automatically if you request it when applying for benefits Employer-Paid Top-Ups - Some employers continue to pay part of your salary during parental leave - This counts as regular employment income - It appears on your T4 slip - You may pay more total tax on combined income during leave Maternity Benefits (Québec) - If you live in Québec, you may receive parental insurance plan (QPIP) benefits instead of EI - These follow
Yes, EI parental benefits are fully taxable income. You'll receive a T4E slip showing the amount, and you report it on your tax return. However, you can request tax withholding when you apply, or claim certain credits like the caregiver amount to reduce your tax owing.
Yes, if you pay for daycare or babysitting while on parental leave, you can claim these as childcare expenses. Typically the lower-income spouse claims the deduction, and there are limits based on your family's earned income.
The Canada Child Benefit is based on your family's net income from the previous year. If your current-year income drops during parental leave, your benefit is adjusted in the next benefit period, potentially increasing the monthly amount you receive.
You normally stop CPP contributions while receiving parental benefits, but you may receive a CPP contribution credit that protects your retirement pension calculation. This is typically automatic, but confirm with Service Canada.
You may qualify for the caregiver amount (for caring for a child under 18), the child amount, and potentially the basic personal amount. Lower income during leave can also unlock income-tested benefits like the Canada Child Benefit increase.