When it comes to employee benefits, knowing which ones are taxable can feel complicated. But don’t worry—we’ll walk you through it, step by step. By the end of this guide, you’ll have a clear understanding of taxable benefits and how to make smart choices for your business and your team.
What Are Taxable Benefits?
In Canada, not all benefits you offer to employees are tax-free. Taxable benefits are those the government considers as additional income. That means you need to include them in your employees' total income when they file taxes.
Examples of Taxable Benefits
Here are some common taxable benefits you might offer:
Company Car
When employees use a company car for personal reasons, they must report the personal use as a taxable benefit.
Gift Cards
Gift cards are a thoughtful gesture, but if you give your employees more than $500 worth in a year, the value is taxable.
Employee Loans
If you offer loans to employees at a lower interest rate than the market rate, the difference is considered a taxable benefit.
Health and Dental Insurance
Basic health and dental insurance provided by employers typically aren’t taxable. However, additional coverage beyond the basic plan could be taxable.
Why Should You Care?
Understanding taxable benefits is crucial for managing your employee benefits package effectively. You want to stay compliant with tax laws while also giving your employees clear expectations around their taxable income.
How to Minimize Taxable Benefits for Your Employees
Focus on benefits that are non-taxable or have minimal tax implications. For instance, many group benefits plans, like health and dental, are not taxable, making them great options for boosting employee wellness without increasing their tax burden. You can also explore tax-efficient ways to structure bonuses and other forms of compensation.
Let’s Make Benefits Simple
You want to create a positive, healthy work environment for your team. Offering the right benefits plays a big role in that, and you don’t have to be a tax expert to get it right. We're here to help you navigate the complexities of benefits planning, so you can build a plan that aligns with both your business goals and your team’s well-being.