When your employer gives you something of value beyond your salary (a company car, paid parking, certain insurance premiums), CRA may require that value to be added to your employment income. These are called taxable benefits, and they appear in box 40 of your T4 slip. This page explains the general rules; the directory of taxable employment benefits has a separate guide for each common benefit.
CRA’s Definition
| Term | Meaning |
|---|---|
| Taxable benefit | Any economic advantage an employer provides to an employee (or a person connected to the employee) that CRA deems part of employment income |
| Near-cash benefit | Gift cards, certificates, or items easily convertible to cash: treated as cash and fully taxable |
| Non-cash benefit | Goods or services (company car, insurance premium): taxable at fair market value unless CRA exempts them |
| Allowance | Fixed amount paid without requiring receipts: generally taxable unless CRA provides a specific exemption |
| Reimbursement | Employer repays employee for a specific verified expense: generally not taxable if for employment purposes |
Box 40 on Your T4: How It Works
| Box | Label | What it contains |
|---|---|---|
| Box 14 | Employment income | Total employment income including all taxable benefits |
| Box 40 | Other taxable allowances and benefits | Breakdown of non-cash/allowance benefits included in box 14 |
| Relationship | Box 40 is already inside box 14, not additional income | |
| Tax collected | Usually via payroll throughout the year |
Example: Your salary is $70,000. Your employer provides $1,200 in taxable group life insurance premiums and $1,800 in taxable parking.
- Box 14 = $73,000 (salary + $3,000 benefits)
- Box 40 = $3,000 (the benefit portion)
The T4 slip guide covers the other boxes on the slip.
How a Taxable Benefit Is Taxed
Taxable benefits increase your employment income the same way a salary increase does: you pay income tax on the full value at your marginal rate. Because the benefit is already in box 14, there is nothing extra to report on your return, and for most employees the tax is collected through payroll during the year. What the benefit costs you in tax depends on your marginal rate:
| Annual taxable benefit | Additional tax at 30% marginal rate | At 40% marginal rate |
|---|---|---|
| $300 | ~$90 | ~$120 |
| $600 | ~$180 | ~$240 |
| $1,200 | ~$360 | ~$480 |
| $2,400 | ~$720 | ~$960 |
Where it matters most is when box 40 pushes part of your income into a higher marginal bracket, raises the income that income-tested benefits are based on, or is significantly different from what you expected.
Common Taxable Benefits
| Benefit | Taxable? | Where it appears |
|---|---|---|
| Group life insurance premiums (employer-paid) | ✅ Yes | Box 40 |
| Company car (standby charge + operating cost) | ✅ Yes | Box 40 + box 34 |
| Employer-paid parking | ✅ Generally yes | Box 40 |
| Flat work-from-home allowance (no receipts) | ✅ Yes | Box 40 |
| Personal use of employer credit card | ✅ Yes | Box 40 |
| Gifts and awards over $500/year | ✅ Yes (portion over $500) | Box 40 |
| Interest-free or low-interest loans | ✅ Yes (imputed interest at the CRA prescribed rate) | Box 36 |
| Moving allowance over exempt amount | ✅ Partially | Box 40 |
| Meals provided routinely | ✅ Yes | Box 40 |
| Childcare provided at work | ✅ Yes, with very specific exceptions (such as a remote work location) | Box 40 |
| Club memberships (personal use) | ✅ Yes | Box 40 |
| Travel benefits unrelated to work | ✅ Yes | Box 40 |
| Employer RRSP match (group RRSP) | ✅ Yes (at contribution) | Box 14 (offset by an RRSP deduction) |
Equity pay is employment income too, but each instrument has its own timing: stock options are taxed at exercise, RSUs at vesting and an ESPP discount at purchase.
Common Non-Taxable Benefits
| Benefit | Taxable? | CRA basis |
|---|---|---|
| Employer health/dental insurance premiums | ❌ Not taxable (except Quebec) | CRA IT-470 |
| Employer-paid long-term disability premiums | ❌ Not taxable (but the benefits become taxable if you claim; see the LTD guide) | Group insurance rules |
| Non-cash gifts ≤ $500/year | ❌ Not taxable | CRA administrative policy |
| Employee discounts (reasonable threshold) | ❌ Not taxable | CRA IT-470 |
| Subsidized meals at cost | ❌ Not taxable | CRA administrative policy |
| Overtime meals (occasional) | ❌ Not taxable under $23/meal | CRA administrative policy |
| Work-from-home expense reimbursements (actual) | ❌ Not taxable | CRA T2200 rules |
| Safety equipment required for work | ❌ Not taxable | Employment use |
| Professional development / tuition (work-related) | ❌ Not taxable | CRA IT-470 |
| Professional dues paid by employer (if required for employment) | ❌ Not taxable | Employment use |
| Uniforms and special clothing | ❌ Not taxable | Employment use |
Quebec: More Benefits Are Taxable
| Benefit | Other provinces | Quebec |
|---|---|---|
| Employer-paid health/dental premiums | ❌ Not taxable | ✅ Taxable in Quebec |
| Group life insurance premiums | ✅ Taxable | ✅ Taxable |
| Vision care premiums | ❌ Not taxable | ✅ Taxable in Quebec |
Quebec employees receiving employer-paid health and dental benefits will see these amounts included in their provincial income: the Quebec provincial return treats them as taxable employment income, even though the federal return does not. The guide to whether employer health and dental plans are taxable covers the RL-1 box J reporting.
How Taxable Benefits Are Valued
| Benefit type | How CRA values it |
|---|---|
| Cash or near-cash | Face value |
| Goods | Fair market value (FMV) at time provided |
| Company car | Specific formula (standby charge + operating cost benefit) |
| Housing | FMV of comparable housing in the area |
| Low-interest loans | Difference between rate charged and CRA prescribed rate |
| Air travel (personal) | FMV of comparable commercial ticket |
If Box 40 Is Higher Than Expected
| Step | What it tells you |
|---|---|
| Ask employer for a breakdown | Employer must provide details of what is in box 40 |
| Check T4 box 34 | Contains the automobile benefit if you have a company car |
| Compare to prior year | Identifies what changed (new benefit, different calculation) |
| Review with an accountant | If the benefit seems wrong: CRA forms and FMV can be disputed |
A bonus is cash pay rather than a benefit, so it is taxed through withholding instead of box 40; the guide on what to do when you get a bonus covers it.