Taxable, non-taxable employee benefits
March 29, 2018
When you are interviewing for a new a new job, perks like company-paid gym memberships, tuition reimbursement or a free cellphone may seem really attractive and influence you to accept the position. However, it is important to keep in mind that come tax time, all or part of the value of these employee benefits may be included in taxable income on your T4 slip.
Here are 10 things that may form part of your compensation and how they are viewed by CRA.
- Group benefits: Amounts your employer pays for your life, accident and critical illness insurance coverage are taxable benefits. But when the company pays all or part of the cost of your extended health care, dental plan, short-term disability (STD) or long-term disability (LTD) insurance you do generally not pay tax on the premiums. If you collect on your STD or LTD insurance you will pay taxes if any part of the premiums were employer-paid.
- Pensions/Group RRSPs: Your company’s contributions to your pension plan are not taxable. However, your employer’s contributions to your Group RRSP account are viewed as additional taxable income by CRA. But you can deduct RRSP contributions (up to $26,010 for 2017) so you will not actually have to pay taxes on Group RRSP contributions made by your employer on your behalf.
- Service and recognition awards: Cash, gift certificates and things like gifts of stock certificates and gold coins are always taxable benefits. However, you can receive tangible tax-free gifts or awards worth up to $500 annually in some specified circumstances, such as a wedding or outstanding service award. In addition, once every five years you can receive a tax-free, non-cash long-service or anniversary award worth $500 or less
- Clubs and Recreational Facilities – If your employer pays or subsidizes the cost of membership or attendance at a recreational facility such as a gym, pool, golf course, etc. it is considered a taxable benefit. But if the company provides a free or subsidized onsite facility available to all employees, it is not a taxable benefit.
- Tuition reimbursement: If you get a scholarship or bursary from your employer it will be a taxable benefit unless you took the program to maintain or upgrade your employment skills. For example, if you need an executive MBA to be promoted, no tax is payable on the value of company-paid tuition. Where the company gives your child a scholarship or bursary, generally neither you nor your son or daughter who gets the scholarship has to pay taxes on the amount.
- Transit Passes: Transit passes are a taxable benefit unless the employee works in a transit-related business (such as a bus, train, or ferry service business).
- Child Care Expenses are a taxable benefit unless child care is provided to all employees in the business at little or no cost.
- Mobile phone or internet: Charges paid by the company for the business use of your cellphone and internet are not taxable. If your phone or internet is used in part for personal reasons, that portion of the bill should be reported on your T4 as a taxable benefit. However, if the cost of the basic plan has a reasonable fixed cost and your use does not result in charges over the cost of basic service, CRA will not consider any part of the use taxable.
- Subsidized meals: If the company cafeteria sells subsidized meals to employees, this will not be considered a taxable benefit as long as employees pay a reasonable amount that covers the cost of food preparation and service.
- Discounts on merchandise: Generally, if your employer sells merchandise to you at a discount, the benefit you get is not considered taxable. A document posted on the CRA website in late 2017 suggested that CRA’s interpretation changed, but National Revenue Minister Diane Lebouthillier subsequently announced there have been no changes to the laws governing taxable benefits to retail employees.
This chart illustrates whether taxable allowances and benefits are subject to CPP and EI withholdings. The employer’s Guide: Taxable Benefits and Allowances, including What’s New? Can be found here.
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| Written by Sheryl Smolkin | |
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Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus. |
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