Other Employment Income

Understanding Tax Implications of Employer-Paid and Employee-Contributed Premiums in Wage Loss Insurance Plans

1, "Full Employer Coverage (Fully Taxable Benefit)"

Situation: When your employer pays all the premiums for a wage loss insurance plan, and you haven't contributed.

Example: In this scenario, if you receive benefits due to temporary disability, the entire amount is taxable income.

2, "Shared Premiums (Partially Taxable Benefit)"

Situation: When both you and your employer contribute to the insurance plan.

Example: This scenario involves a situation where the benefits are taxable, but you can reduce the taxable portion by reporting your personal premium contributions, which helps lower your tax liability.

3, "Reporting Employee Contributions (Tax Reduction and Documentation)"

Situation: When income from a wage loss insurance plan is reported on a T4 slip, and you need to report your own contributions on your tax return.

Example: Here, you inform the tax agency (CRA) about your contributions on Line 10130, resulting in a reduction of the taxable income. Maintaining documentation from your employer or insurance company is important to support this reduction if the CRA requests verification.