What employee benefits are taxable in Canada?

Taxable benefits include employer-paid premiums for Life Insurance, Accidental Death & Dismemberment (AD&D), and certain Disability Insurance plans. The tax implications vary based on the structure of the plan.

How can employers optimize benefits taxation for employees?

Employers can optimize taxation by balancing employer and employee-paid premiums, using Health Spending Accounts, and tailoring benefits to minimize tax burdens.

What employee benefits are taxable in Canada?

Taxable benefits include employer-paid premiums for Life Insurance, AD&D, and some Disability plans.

How can employers optimize benefits taxation?

Employers can optimize benefits taxation by balancing cost-sharing structures and offering tax-efficient benefits such as Health Spending Accounts.

Employee Benefits

Taxable Benefit or not?

Pooled Benefits

Taxation of Employee Benefits

How are employee benefit premiums taxed? What benefits are taxable benefits and which are non-taxable? How to set up cost-sharing for employee benefits?

When it comes to employee benefit premiums and taxation, it’s important to remember that taxation depends on whether the premium is employer-paid or employee-paid (typically via payroll deduction).

If the goal is to avoid taxable benefits for employees, the best way to set up benefits cost-sharing is to ensure the employee is paying the premium for certain benefits. If they do not pay these premiums, this creates a taxable benefit for the premium amount, or in the case of disability insurance, a taxable payout in the event of a claim.

At Immix, we want to ensure that you are set up in the most optimal way! If you’re unsure whether you have properly established your payroll deductions, please reach out to us.

Employer-paid premiums are a taxable benefit

Life Insurance

Any premium paid by the Employer must be treated as a taxable benefit to the Employee
Any benefit paid upon death is non-taxable, regardless of who pays the premium

AD&D Insurance

Any premium paid by the Employer must be treated as a taxable benefit to the Employee
Any benefit paid upon death is not taxable, regardless of who pays the premium

Dependent Life Insurance

Any premium paid by the Employer must be treated as a taxable benefit to the Employee
Any benefit paid upon death is non-taxable, regardless of who pays the premium

Critical Illness Insurance

Any premium paid by the Employer must be treated as a taxable benefit to the Employee
Any benefit paid is not taxable, regardless of who pays the premium

Taxation depends upon who pays the premium

Short-Term Disability

Any premium paid by the Employer is not a taxable benefit to the Employee
If the Employer pays any portion of the premium, the benefit in the event of a claim is taxable as income to the employee

Long-Term Disability

Any premium paid by the Employer is not a taxable benefit to the Employee
If the Employer pays any portion of the premium, the benefit in the event of a claim is taxable as income to the employee

Tax-neutral benefits

Extended Health Benefits

Any premium paid by the Employer is not a taxable benefit to the Employee
Any benefit paid is not taxable, regardless of who pays the premium

Dental Care Benefits

Any premium paid by the Employer is not a taxable benefit to the Employee
Any benefit paid is not taxable, regardless of who pays the premium

Taxation varies depending on account type

Health Spending Accounts

Amounts paid for CRA-eligible medical expenses are tax-deductible to the Employer
Amounts reimbursed for CRA-eligible medical expenses are not a taxable benefit for Employees

Lifestyle Spending Accounts

Amounts paid for Lifestyle expenses are tax-deductible to the Employer
Amounts reimbursed for Lifestyle expenses are a taxable benefit for Employees

Taxation of Benefits