Wage-loss replacement benefits are payments received from a private insurance plan (often arranged by your employer) to compensate for lost employment income due to illness, accident, or maternity. These benefits are taxable, but the amount you include on your tax return depends on who paid the premiums. These benefits are categorized as employment income for tax purposes.
When are benefits taxable?
- Fully taxable: If your employer paid all the premiums for the wage-loss replacement plan, the entire benefit you receive is taxable and subject to income tax withholding.
- Partially taxable: If you and your employer shared the cost of the premiums, you can deduct the contributions you made from the benefits you received. Only the remaining amount is taxable. You are responsible for tracking your contributions to claim this deduction.
- Not taxable: If you paid all the premiums yourself, the benefits are not taxable.
Line 107: Reporting the gross benefit
- T4A slip: Benefits are typically reported in Box 107 of a T4A slip.
- RL-1 slip: For Quebec residents, wage-loss replacement benefits are reported on an RL-1 slip in Box O.
Example 6
Marie is a resident of Quebec and an employee. In 2024, she took a leave from work due to an injury and received wage-loss replacement benefits from a private insurance plan. Her employer paid all the premiums for the insurance plan. Marie receives the following tax slips: a T4A slip showing $8,000 in Box 107 for wage-loss replacement benefits, and an RL-1 slip showing $8,000 in Box O for the same benefits.
Answer: On her federal T1 tax return, Marie reports the $8,000 from Box 107 of her T4A slip on line 10400, "Other employment income." Since her employer paid all the premiums, she cannot claim a deduction for plan contributions.
On her Quebec TP-1 tax return, Marie reports the $8,000 from Box O of her RL-1 slip on line 107, "Other employment income." She also includes Code 06 in Box 106 to indicate that the amount represents wage-loss replacement benefits.
Posted on 29 December 2025