Some employers pay wage-loss replacement contributions to an insurer so that their employees will receive compensation under a sickness, accident, disability, or income maintenance insurance plan. As a participant in one of these plans, you’ll receive payments if you lose part or all your employment income due to a serious illness or accident.
If both you and your employer pay the premiums for the plan, you can deduct the cost of the premiums that you paid from the benefits received under the plan. Keep in mind that it’s your responsibility to keep track of the premiums you’ve paid into the plan.
If you pay the premiums on your own, the benefit amounts that you receive under the plan are not taxable.
Note: To figure out the total premiums you paid during the year, refer to the last pay stub you received in 2016. The amount will be shown under LTD or STD premiums.
In some cases, your wage-loss replacement plan might state that you’ll receive a lump-sum payment when you resign, when you retire, or upon your death. This amount is determined by the number of unused sick leave credits that you accumulated while you were covered by the plan. If you paid the premiums for the plan, in whole or in part, a portion of the lump-sum payment that you receive is considered non-taxable. For more information, speak to your employer or to your plan’s administrator.
Note: If you’re a resident of Québec, any wage-loss replacement benefits that you receive are subject to source deductions of income tax.
Where can I learn more?
- Line 104 – Other employment income (CRA website)
- Wage loss replacement benefits (Revenu Québec website)