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Employee Benefits. Are they taxable or not?


The amount of any taxable benefits provided by an employer should be subject to source deductions on a pay period basis. Taxable employment benefits should be reported on either a T4 for current employees or T4A for former employees.

Some examples that may be taxable benefits include:

  • Personal use of an employer's automobile by the employee. Driving between the employees home and their regular place of work is considered to be personal.
  • There is an interest benefit for loans to employee's for interest free or low interest loans. There is no benefit if the interest is paid based on CRA's prescribed rate of interest.
  • Gifts and Awards.
    Employers can give up to $500 in non cash gifts and awards annually without incurring a taxable benefit. Any amounts over $500 must be reported as a taxable benefit.
    Cash and near cash gifts and awards are always taxable. This includes gift certificates and prepaid credit cards.
  • Registered Retirement Savings Plans
    Employer contributions to employee's RRSP's and RRSP administration fees are a taxable benefit. Employers do not have to deduct income tax on the contributions if they have reasonable grounds to believe the employee can deduct the contribution in the year. CPP and EI must be deducted if applicable.
  • Medical Expenses
    Generally, medical expenses of an employee that are provided or paid by the employer are a taxable benefit to the employee. Medical expenses are not taxable if they are paid out of a private health service plan such as medical or dental plans. Employer contributions to such plans are not a taxable benefit to the employee.
  • Telecommunications
    Home Internet Service and Cellular phone service is not taxable if the employer is the primary beneficiary of the service.
  • Tuition fees and related cost is generally not a taxable benefit to the employee provided the training is employment related.
  • House Rental
    Any amount paid for employees housing expenses is a taxable benefit.

It is the responsibility of the employer to identify, calculate and report taxable benefits related to employment.