- Dean C Paley, CPA, CGA ,CFP - http://deanpaley.com -

Taxable Employment Benefits

The Income Tax Act has broad and general rules requiring most fringe benefits to be included in net employment income.

The government wants to discourage employers from substituting tax-free fringe benefits [1] for actual cash compensation to avoid income tax. In the end, the value of a benefit of any kind must be added to your employment income.

Examples of Taxable Benefits from Employment:

Sales Taxes Are Taxable Benefits

Any sales taxes paid by your employer to provide the benefit are included as part of the benefit. If you employer is exempt from paying the sales tax or a portion of the sales tax then the full amount of the sales tax that would have been paid is to be included as part of the taxable benefit.

Tax Free Benefits

The government allows employers to provide certain benefits to employees’ tax free in order to fulfill policy objectives. The provision of these benefits remains deductible to the business and tax free to the employer to encourage businesses to provide such benefits.

Non-Taxable Employment Benefits Include:

Note: If you employer contributes to a sickness accident or disability [3] insurance plan, or an income maintenance insurance plan, any benefits you receive are taxable but will be reduced by any of your premiums paid into the plan.

Tip: Have your employer provide as many non-taxable benefits as possible without changing the level of benefits received. This will reduce your tax burden.

Looking For Professional Help?

We can help you get the most from your employment benefits. Call us at (289) 288-1206 or email us [4] to arrange an appointment to have us review your tax situation and look for opportunities to reduce your family tax bill [5].