Taxable Benefits in Canada: A Quick Guide for 2025

As companies expand their employee offerings to attract and retain talent, payroll professionals are expected to keep up with the evolving landscape of taxable benefits. Whether you’re preparing for year-end reporting or gearing up for your next payroll interview, having a solid handle on how taxable benefits are defined and reported is more important than ever.

Taxable Benefits Are Showing Up in Interviews

Lately, I’ve been hearing the same thing from both clients and candidates – taxable benefits are popping up more and more in interviews. Whether you’re applying for an entry-level payroll position or a more senior role, hiring managers are paying close attention to how well candidates understand these concepts.

So, if you’re on the hunt for a new role, it’s worth brushing up on things like:

• What qualifies as a taxable benefit
• How to determine if something is taxable under CRA rules
• How to report these benefits on a T4
• How wellness and health perks are treated
• The ins and outs of reporting on company cars, cellphones, and more
• What effect these benefits have on CPP and EI deductions

Let’s walk through what you need to know, whether you’re preparing for an interview, reviewing your payroll process, or just want to stay sharp in your current role.

What Is a Taxable Benefit?

A taxable benefit is any product or service provided to an employee that gives them a personal advantage. These benefits must be included in the employee’s income for tax purposes and can be non-cash (like a company laptop used at home) or a cash-equivalent (like a gift card).

Common examples include:

• Employer-paid life insurance
• Personal use of a company car
• Cellphones with personal use
• Gym memberships or wellness stipends
• Interest-free or low-interest loans

If it’s something the employee benefits from personally – and they didn’t pay for it – odds are, it’s taxable.

How Do You Determine Whether a Benefit Is Taxable in Canada?

The CRA uses a general guideline: if the employee gains a personal or economic advantage that isn’t strictly for business, it’s usually taxable.

Ask yourself:

• Is the benefit personal in nature?
• Would the employee otherwise pay for it themselves?
• Does the benefit primarily help the employee, not the company?

If the answer to any of these is yes, the benefit likely needs to be reported.

Where Does CRA Folio T20 200 Come In?

T20 200 – Taxable Benefits is part of the CRA’s Income Tax Folios, specifically section S4-F3-C1. Think of it as the CRA’s rulebook for employee benefits – a helpful resource that explains how to evaluate, value, and report them.

It outlines:

• What counts as taxable vs. non-taxable
• Valuation methods for different benefit types (cars, housing, loans)
• Applicable thresholds and exemptions
• How to handle reimbursements and employee contributions

Why this matters: If you’re ever unsure about how to handle a benefit – like a parking allowance or a wellness credit – this is where you’ll find the CRA’s expectations and guidance.

How Do You Report a Taxable Benefit on a T4?

Taxable benefits must be included on an employee’s T4 slip, affecting their total income, tax withholdings, and statutory deductions.

Here’s how it’s usually reported:

• Box 14 – Total employment income
• “Other Information” section – CRA reporting codes

Common CRA codes include:

• Code 40 – Other taxable allowances and benefits
• Code 34 – Employer-provided vehicle
• Code 38 – Business-use-of-home expenses

Accurate reporting here is key to staying compliant and avoiding headaches for both you and your employees.

How Do You Report Taxable Wellness or Health Perks?

Wellness perks are becoming more common, but not all of them qualify as non-taxable.

Examples:

• Non-taxable: Employer-paid premiums for group health or dental plans
• Taxable: Gym memberships, yoga classes, wellness stipends, or personal fitness equipment

If the perk doesn’t fall under CRA’s medical or health protection category, it should be included in the employee’s income and reported under Code 40.

What Are the Key Elements of Calculating a Benefit Like a Company Car or Cellphone?

Company Car:

• Standby Charge: Based on how long the vehicle is available for personal use
• Operating Cost Benefit: Calculated either by personal kilometres driven or as a percentage of the standby charge
• If the employee reimburses part of the cost, the taxable amount can be reduced

Cellphone:

• When a phone or plan is used for both work and personal purposes, the personal portion is considered taxable
• Logs or usage summaries should be kept to estimate the business vs. personal split
• CRA expects fair market valuation and proper recordkeeping

How Do Taxable Benefits Affect CPP and EI Deductions?

In most cases, taxable benefits:

• Increase pensionable earnings, which affects Canada Pension Plan contributions
• May also increase insurable earnings, impacting Employment Insurance premiums

That said, not all taxable benefits are pensionable or insurable. For example, employer-paid premiums for private health insurance may be taxable but are still excluded from CPP and EI calculations. Always check CRA definitions when calculating deductions.

Final Thoughts

As employee benefits become more flexible and tailored, staying informed about taxable benefit rules isn’t just helpful – it’s a must.

Whether you’re reviewing your current policies or prepping for an interview, understanding how to report these benefits properly protects both your company and your career.

📌 Hiring managers are paying attention to this. Candidates are being asked about it. And accurate reporting matters more than ever.

Is there a taxable benefit question you’ve come across in an interview that caught you off guard? Feel free to connect with me on LinkedIn and we’ll try and collate them for a follow-up piece.

Need help navigating year-end compliance or taxable benefits reporting?  The team at Portfolio Payroll Canada are the recruitment partner who understand your needs in a difficult ecosystem.

Are you an NPI member? Join my webinar on the 29th April: Mastering Payroll Interviews – Expert Techniques for Candidate Success: Register here

Tyesha Dwyer-Dawkins is a recruitment consultant at Portfolio Payroll Canada, where she focuses on connecting the best payroll professionals with innovative companies across Canada. With a deep understanding of the staffing landscape, she prioritises meaningful, long-term matches over high-volume placements. Known for her consultative approach and industry insight, Tyesha is passionate about delivering thoughtful hiring solutions in a complex market.

Contact Tyesha today to see how she can help.