Does your T4 say you made more than you thought you did? Perhaps you didn’t consider your taxable benefits. Find out what is and isn’t taxable.
When you get your T4 slip in January or February, you may wonder why the employment income reported in Box 14 is higher than the salary or wages you earned for the year. That’s because your employer must report premiums it pays for certain group benefits and the value of some perks as a taxable benefit, and you must pay taxes on those amounts.
In addition, both you and your employer have to make Canada or Quebec Pension Plan contributions on the value of all taxable benefits plus Employment Insurance contributions on taxable benefits you receive in cash.
However, there are valuable company perks, such as a cell phone, tuition reimbursement and service awards, that aren’t taxable in certain circumstances. Here is how the Canada Revenue Agency (CRA) treats eight common employee benefits for tax purposes:
1. Group life/health premiums
Employer-paid premiums for group life insurance, dependant life insurance, accident insurance and critical illness insurance are taxable benefits and the amounts paid on your behalf will be added to your taxable income. In Quebec, premiums for health and dental insurance are also considered a taxable benefit. (You may also be able to claim health insurance premiums you paid as a tax credit — see Are you entitled to a tax refund for your medical expenses?)
2. Group short- or long-term disability
Employer-paid short-term disability (STD) or long-term disability (LTD) premiums are not taxable benefits. However, when your employer pays any amount towards your STD or LTD coverage, any benefits you may collect in future will be taxable.