In this competitive work market, employees need to find creative ways to attract talent. One creative way to reward and attract employees is by providing taxable benefits. This is a form of compensation provided by employers to their employees. It can be in the form of cash or another form of payment. This form of benefit can be mutually beneficial for both employer and employee because they can provide additional income for employees while reducing their employer’s tax burden.
List of Taxable Benefits
Some common taxable benefits are as follows:
- Cash payments made in lieu of benefits
- Medical, dental, and vision insurance premiums
- Life insurance premiums
- Dependent care assistance
- Transportation benefits, such as parking and mass transit subsidies
- Business use of an employee’s car
- Meals and lodging provided for the convenience of the employer
- Education assistance
- Gym memberships
- Group-term life insurance premiums
- Moving expenses
- Awards and gifts
- Employee discounts
- Tuition reimbursement
- Vacation pay
- Severance pay
- Bonuses
- Stock options
- Profit sharing
- Retirement plans
These packages are often a great way to retain and reward talent. They help relieve stress and financial burden from your employees.
How Are These Benefits Taxed?
Canada’s income tax system requires employers to report any taxable benefits they provide to their employees on their T4 slips. As an employee, you’ll need to include this income in your tax return. The amount of tax you’ll owe on taxable benefits is based on your marginal tax rate, which is determined by your total income for the year.
The specific rules for how taxable benefits are taxed can vary depending on the type of benefit. For example, automobile benefits, such as employer-provided vehicles, may be subject to a special tax calculation. Additionally, in some cases, certain benefits may be exempt from taxation, such as certain medical and educational benefits.
LedgersOnline is Here to Help
Taxable benefits can be an effective way for employers to reward their employees with additional income. LedgersOnline can make tax season easier by helping you understand your obligations around taxable benefits. Our expert bookkeepers will guide you in taking advantage of available deductions, so you can reward your employees with the appropriate level of compensation. Contact us today and get started.
