EI Maternity and Parental Benefits: How They Are Taxed in Canada

Having a baby is exciting, but the tax side of Employment Insurance (EI) maternity and parental benefits catches many new parents off guard. EI benefits are fully taxable income, and if you do not plan for it, you could owe money at tax time instead of getting a refund.

Types of EI Benefits for New Parents

Maternity Benefits

Who: The birth mother only
Duration: Up to 15 weeks
Amount: 55% of your average insurable weekly earnings, up to a maximum of $729 per week (2026)
Waiting period: 1-week unpaid waiting period — waived for claims starting between March 30, 2025 and April 11, 2026

Standard Parental Benefits

Who: Either parent (birth or adoptive)
Duration: Up to 35 weeks (can be shared between parents)
Amount: 55% of average insurable weekly earnings, up to $729/week
Total with maternity: Up to 50 weeks combined (15 + 35); if shared between parents, an additional 5 bonus weeks is available (55 total)

Extended Parental Benefits

Who: Either parent
Duration: Up to 61 weeks (can be shared)
Amount: 33% of average insurable weekly earnings, up to $437/week
Total with maternity: Up to 76 weeks combined (15 + 61); if shared between parents, an additional 8 bonus weeks is available (84 total)

You choose standard or extended before your first payment. You cannot switch once payments begin.

How EI Benefits Are Taxed

EI maternity and parental benefits are fully taxable. They are reported on a T4E slip (not a T4). The key tax implications:

Federal and provincial income tax is deducted at source, but often at a lower rate than your actual marginal rate
EI benefits do not have CPP or EI premiums deducted
If you worked part of the year and received EI for the rest, your total income may result in owing taxes if insufficient tax was withheld from EI payments

The Tax Trap: Working + EI in the Same Year

This is where many new parents get surprised. Suppose you earned $50,000 in salary from January to June, then received $15,000 in EI benefits from July to December. Your total income for the year is $65,000.

Your employer withheld tax based on a $100,000 annual salary. EI withheld tax based on roughly $30,000 annualized. Neither knows about the other income source. The result: not enough total tax was withheld, and you owe money when you file.

Solution: Request additional tax be withheld from your EI payments by filing a TD1 form with Service Canada, or set aside money throughout the year.

Employer Top-Up Plans

Many employers offer a “top-up” to supplement EI maternity/parental benefits. This top-up is usually the difference between your EI payment and a percentage of your regular salary (often 80% to 100%).

The top-up is regular employment income reported on your T4 slip. It is subject to normal payroll deductions including CPP and EI premiums.

Some top-up plans require you to return to work for a minimum period after your leave, or you must repay the top-up. Check your employer’s policy carefully.

EI Repayment (Clawback)

If your net income exceeds $86,125 (2026 threshold), you may have to repay some of your EI benefits. The repayment rate is 30% of EI benefits received or 30% of net income above the threshold, whichever is less.

However, there is an important exception: first-time EI claimants (those who received fewer than one week of regular or special benefits in the 10 previous tax years) are exempt from the repayment provision for special benefits like maternity and parental.

Quebec Parental Insurance Plan (QPIP)

If you live in Quebec, you receive maternity and parental benefits through the Quebec Parental Insurance Plan (QPIP) instead of federal EI. QPIP provides higher replacement rates (up to 70% for maternity) and includes paternity-specific benefits. QPIP benefits are also fully taxable and reported on a Relevé 6 slip.

Tax Credits for New Parents to Remember

While on maternity or parental leave, do not forget these related credits and benefits:

Canada Child Benefit (CCB): Tax-free monthly payment. Apply as soon as the baby is born. Based on family net income.
Childcare expenses: Deductible when you return to work. Generally claimed by the lower-income spouse.
GST/HST credit: May increase with a new dependent.
Provincial benefits: Some provinces have additional child-related tax credits.

Key Takeaway

EI maternity and parental benefits are fully taxable. If you receive both employment income and EI in the same year, the combined income can push you into a higher tax bracket with insufficient withholding. Plan ahead by requesting extra tax withholding or setting aside funds.

Expecting a baby and want to understand the tax implications? Visit FinGems.ca for personalized guidance.