Taxable vs non-taxable benefits — what goes on the T4

Owners see perks as goodwill; the CRA sees compensation. Almost every employer-provided benefit starts as taxable, must be valued and goes on the employee’s T4. The exceptions are real but narrow and conditional. Sorting non-taxable and taxable benefits means checking each perk against a specific CRA administrative policy and every condition in it, as the sections below do.

Taxable benefits in gifts and awards: the $500 rules

Generally, gifts, awards and long-service awards are taxable. Under the CRA’s administrative policy, a non-cash gift or award is not taxable where all of the following apply. The combined fair market value of an unlimited number of non-cash gifts and awards is $500 or less in the year including taxes. The gift must be for a special occasion such as a religious holiday, a birthday, a wedding or the birth of a child; a recognition award is for the employee’s overall contribution to the workplace; and it is not a reward tied to job performance. Anything above $500 is taxable on the excess.

Small items of trivial value — coffee or tea, T-shirts, mugs, plaques and trophies — are not counted against the $500.

Cash and near-cash are always taxable

The policy does not apply to cash or near-cash. Near-cash includes anything easily converted to cash, digital currency, and prepaid cards issued by a financial institution on a major payment network. A reimbursement — where the employee buys something and submits a receipt — is cash.

When a gift card counts as non-cash

A gift card is treated as non-cash only where all of the following apply. It comes preloaded and can only be used at a single retailer or an identified group of retailers; its terms and conditions clearly state the amount cannot be converted into cash; and you keep a log recording the employee’s name, the date, the reason, the type of card, the amount and the retailer. Miss any of those and the card is near-cash, and taxable.

Long-service awards

A long-service award is non-taxable where it is a non-cash gift or award and recognizes 5 or more years of service. At least 5 years must have passed since the last long-service award to that employee, and its fair market value is $500 or less including taxes. This limit is separate: unused room in one $500 limit cannot be moved to the other.

Cell phones and internet

A phone and internet allowance is always taxable. A phone you own and require for duties is not. A service plan is not taxable if required for duties, at a reasonable fixed cost, with personal use adding no charges; any excess is taxable unless repaid. Reimbursing a phone the employee bought is taxable.

Related: Cell phone allowance rules.

For home internet, the business-use portion is not a taxable benefit.

Parking

Parking you provide or reimburse is generally taxable, valued at fair market value — the price a similar spot would fetch in the surrounding area, not what it costs you. Three situations sit outside that:

• Business use. Not taxable where the employee regularly has to use a vehicle to perform their duties. The CRA treats “regularly” as an average of at least 3 days in a 5-day work week, and will accept a proration below that. Commuting between home and work does not count as business use.
• Shopping centre or industrial park. Not taxable where the lot is open to employees and the public, spaces are free, and spaces are not assigned.
• Scramble parking. Not taxable where there are no more than 2 spaces for every 3 employees who want parking, spaces are unassigned, and parking is offered to everyone who wants it.

Vehicles are their own subject

An employer-provided vehicle is not a simple benefit — it produces a standby charge and an operating expense benefit, calculated on their own rules. That is covered separately in the company car taxable benefit, and the alternative of paying a per-kilometre allowance is in vehicle and mileage deductions.

The line between a benefit and a reimbursement matters here. A payment that repays a documented business cost is not a benefit at all. See reimbursing yourself properly for how that distinction is evidenced.

Reporting and the T4

A taxable benefit is added to income, generally attracts CPP and income tax withholding, and may attract EI depending on whether it is cash. It goes on the T4 (see slip filing deadlines). The usual failure is finding it at year-end, after twelve pay runs without withholding.

The bottom line

Assume taxable, then check for a specific CRA policy and every condition. Keep the gift card log and parking research, and run benefits through payroll as they happen. Our payroll services handle benefits and T4s; paying yourself is in salary vs dividends.

This article is general information for Canadian business owners and is current as of July 2026. It is not tax, legal or accounting advice, and it does not create a client relationship. Tax rules change and your situation is unique, so please speak with a CPA before acting on anything here.

Health costs paid personally instead fall under a separate personal credit with a threshold of its own — see the medical expense tax credit explained.