Pricing In an EI Repayment Before the Benefits Even Started

The situation

David called our office on a Tuesday afternoon with a question he had clearly rehearsed: if he drew several months of employment insurance benefits during the coming gap in his surgical schedule, what would it actually cost him once tax came due. He was not asking whether he was eligible. He was asking what the number at the end would look like, and he wanted it before he made any decisions, not after a cheque had already arrived.

David was a surgeon in a hospital-affiliated practice in Pickering. His group had told him, well ahead of time, that funding pressure meant his operating-room block time would be suspended for several months the following year, a genuine interruption of his earnings rather than a personal choice about when to step away. That distinction mattered, because it meant David would be drawing regular employment insurance benefits, the only category that comes with an income-tested repayment obligation. Special benefits such as parental, sickness or compassionate care benefits carry no repayment at all, however high a claimant's income; regular benefits do, and David's would be regular benefits. Separately from his medical income, he and his wife Beth, a dentist who owned her own practice, held a portfolio of residential rental properties they had built up over a decade. Between his surgical income, his share of the rental income, and Beth's practice income flowing through their household, their combined tax position was already complicated before employment insurance entered the picture at all.

David had used the same accountant, Lucia, for years to file the couple's returns, and when he first raised the idea of the coming suspension, Lucia's answer had been vague: something to the effect that higher earners sometimes had to repay part of what they received, but that it would sort itself out at filing time. That answer did not sit well with David. He had watched enough of his own year-end tax bills arrive as unwelcome surprises to know that 'it will sort itself out' usually meant someone had not actually done the math.

Employment insurance regular benefits are taxed as income, and above a certain net income threshold, a portion of the regular benefits received in the year has to be repaid, calculated as a percentage of the amount by which income exceeds that threshold, up to the full amount of the regular benefits received. For someone with David's combined income from surgery and a rental portfolio, that repayment was not a marginal concern. It was likely to claw back a meaningful share of whatever he collected during the suspension, and the precise amount depended on exactly how his and Beth's income was reported and split across the year.

What David wanted from us was not a way around the repayment. He understood he would owe something back if his income stayed where it had been. What he wanted was a real number, calculated properly against his and Beth's actual combined income picture, so that when the benefit period arrived, the tax consequence would be something he had already planned for rather than something that showed up as a bill.

The complication

The complication was that David's income was not a single, predictable stream. His surgical earnings varied year to year depending on his call schedule and any consulting work layered on top. The rental portfolio added its own variability, since repairs, vacancies, and the timing of when rent was collected all shifted the net income figure that fed into the repayment calculation. And because David and Beth held some of the rental properties jointly, a portion of that rental income was reportable on her return rather than his, which mattered because the repayment threshold applies to the individual receiving the benefits, not to the household as a whole.

Lucia's past filings had reported the rental income inconsistently from year to year, sometimes closer to an even split and sometimes weighted toward whichever of them had done more of the property management that year, rather than following the couple's actual ownership percentages on title, which is what the Canada Revenue Agency expects jointly owned rental income to follow regardless of who happens to manage a property in a given year. That inconsistency made it hard to project forward with any confidence, because the repayment calculation depended on knowing, in advance, what David's individual net income for the leave year would actually be, and the historical filings did not give a clean, correct baseline to build from.

There was also a timing question layered on top. If David took the leave in a year when a large rental gain or a bonus from the surgical group happened to land, the repayment could be significantly higher than in a quieter year. He had some, though not complete, control over when the leave started, and part of what he was asking us to help with was whether shifting the timing by a few months could meaningfully change the outcome.

Underneath all of this was the real driver of the file, which David was upfront about: he did not particularly care whether the repayment came out slightly higher or lower than some theoretical best case. What he cared about was not being blindsided. A predictable number he could plan around was worth more to him than squeezing out the last few thousand dollars of savings through aggressive timing, and he told us that directly in the first meeting.

Beth's own practice added one more wrinkle. Her income moved somewhat independently of David's, and because the repayment calculation looked only at David's own net income, getting the ownership-based rental split reported correctly mattered even more in a year where Beth's practice had a particularly strong quarter, since any lingering inconsistency in how the properties had been reported could distort David's individual number in either direction. None of these pieces were large on their own, but stacked together they meant a projection built on last year's numbers alone would likely be wrong by the time David's leave actually arrived.

What we did

1. Reconstructed a clean multi-year income baseline. We pulled several years of David and Beth's filings, standardized how the rental income had been split between them, and built a consistent picture of David's individual net income pattern, since the repayment threshold applies to him personally and the historical numbers had not been reported consistently enough to project from as they stood.
2. Modelled the repayment under several leave-timing scenarios. Using the reconstructed baseline, we projected David's expected repayment if the leave started in each of the following few quarters, accounting for his typical surgical income pattern and the rental portfolio's seasonal cash flow, so he could see in concrete terms how much the timing actually moved the final number rather than guessing at it.
3. Reviewed how the rental income was being split with Beth. We confirmed the couple's actual ownership percentages on title for each property and checked that against how the income had actually been reported in past years, since only the correct, ownership-based split would hold up if the repayment calculation was ever questioned, and reporting it consistently going forward gave David's individual net income figure something accurate to build the projection on rather than a rough approximation.
4. Factored in Beth's own income pattern. Because David's projection depended on a clean, ownership-based rental figure, and because the repayment threshold is tested against his individual net income rather than the household's combined total, we built Beth's typical income variation into the same model to confirm her own filing stayed accurate alongside his, rather than treating David's projection as if it existed in isolation from the rest of the household's finances, which would have missed how a change on her side could still ripple into the accuracy of his number.
5. Set a target repayment figure David could plan around. Rather than presenting a wide range, we narrowed the projection to a single expected figure with a modest buffer above it, giving David a concrete number to set aside well ahead of the leave rather than an estimate he would have to guess at closer to the date. A single number with a buffer, rather than a range, was what let him actually budget for the repayment instead of just being generally aware it was coming.
6. Coordinated the timing recommendation with David's actual schedule. The group had given him a window rather than a fixed date for when the suspension of his block time could begin, so we identified a start date inside that window that avoided a known large surgical income period, without requiring David to renegotiate his commitments with the group in a way that would have disrupted his practice, balancing the tax benefit against what was actually workable for him professionally and for the colleagues covering his patients.
7. Documented the projection and the assumptions behind it. We gave David a written summary of the projected repayment, the income assumptions it relied on, and what would change the number if his or Beth's income shifted, so he was not relying on memory of a conversation months later when the leave actually began. Having it in writing also meant he could hand the same summary to his own bookkeeper without having to reconstruct the reasoning from scratch.
8. Checked in before the leave started to confirm the numbers still held. Closer to the date, we revisited the projection against David's actual year-to-date income and Beth's most recent practice results, confirming the set-aside figure was still accurate before he formally committed to the suspension window and gave the group his final start date, rather than assuming a projection built months earlier still matched his real position.

The outcome

David took his leave on the schedule we had modelled, and when the repayment was calculated at filing time, the figure came in close to the projection we had given him, within the buffer we had built in, even though his surgical income for that year ended up slightly higher than the baseline we had used. He had already set the funds aside, so there was no scramble to cover it and no unpleasant surprise at filing time, which was the outcome he had actually asked for from the start.

The rental income split with Beth was corrected going forward to match their actual ownership percentages on title, reported consistently rather than shifting from year to year, which had the secondary benefit of making future projections easier for both of them, not just for this one leave. It did not eliminate the repayment; David still gave back a meaningful portion of the benefits he received, as expected for someone with his combined income. That was never in question and was never presented to him as avoidable.

What changed was that David knew the number months before it arrived, chose a leave date that was workable for his practice rather than disruptive, and went into the filing season with the money already set aside. He told us afterward that the certainty mattered more to him than the amount, which was exactly what he had said in that first phone call.

The cleaned-up rental income split with Beth turned out to matter beyond this one filing. In the years since, both of them have used the same consistent method to report the portfolio's income, which has made their annual filings faster and their year-to-year projections more reliable, a small side benefit of a process that started as a single question about one leave.

What you can learn from this