Understanding Dental Codes on T4 Slips: A Comprehensive Guide
Dental benefits are a crucial part of employee compensation packages in Canada, but many employees and employers struggle to understand how these benefits are reported on T4 slips. The Canada Revenue Agency (CRA) requires employers to disclose taxable benefits, including certain dental coverage amounts, on an employee’s T4 slip.
Misreporting dental benefits can lead to tax discrepancies, audits, or penalties. This guide will break down everything you need to know about dental codes on T4 slips, including how they are classified, reported, and taxed.
2. What Are T4 Slips and Why Do They Matter?
A T4 slip is a tax document that employers in Canada must provide to employees by the end of February each year. It summarizes:
- Total earnings
- Deductions (CPP, EI, income tax)
- Taxable benefits, including certain dental benefits
The CRA uses T4 slips to verify income and ensure proper tax compliance. If dental benefits are not reported correctly, employees may face unexpected tax liabilities.
3. Dental Benefits and Tax Implications
Not all dental benefits are taxable. The CRA distinguishes between:
- Non-taxable benefits: Employer-paid premiums for health and dental insurance plans (generally not taxable).
- Taxable benefits: Direct payments for dental services beyond what’s covered under a standard plan (e.g., cosmetic dentistry).
Key Considerations:
- If an employer pays for 100% of dental coverage, it’s usually non-taxable.
- If an employee receives cash reimbursements for dental expenses, these may be taxable.
- Health Spending Accounts (HSAs) have different tax implications.
4. Common Dental Codes on T4 Slips
The CRA uses specific codes to report dental benefits on T4 slips. Below is a table of the most common codes:
| Box Number | Description | Taxable? |
|---|---|---|
| Box 14 | Employment Income (includes taxable benefits) | Yes |
| Box 40 | Taxable allowances and benefits (if dental benefits are taxable) | Yes |
| Box 85 | Employer-paid private health services plan (PHSP) premiums | No |
| Box 89 | Non-taxable employment benefits (if dental is part of a group plan) | No |
5. How Employers Report Dental Benefits on T4 Slips
Employers must determine whether dental benefits are taxable. Here’s how they report them:
- Non-Taxable Benefits:
- Employer contributions to a group insurance plan (Box 85).
- Standard dental coverage under a health plan (not reported as income).
- Taxable Benefits:
- Reimbursements for cosmetic dentistry (Box 40).
- Cash allowances for dental expenses (Box 14).
6. Employee vs. Employer-Paid Dental Coverage
| Scenario | Tax Implications |
|---|---|
| Employer pays 100% of dental premiums | Usually non-taxable |
| Employee pays premiums via payroll deductions | Deductible as a medical expense |
| Employer reimburses dental expenses beyond plan limits | Taxable benefit |
7. Taxable vs. Non-Taxable Dental Benefits
Non-Taxable Dental Benefits
✔️ Employer-paid group insurance premiums
✔️ Basic dental services (cleanings, fillings, extractions)
Taxable Dental Benefits
❌ Cosmetic procedures (veneers, teeth whitening)
❌ Cash reimbursements beyond standard coverage
8. How to Read Dental Codes on Your T4 Slip
If you see Box 40 or Box 14 with an amount related to dental benefits, it may be taxable. Check with your employer or accountant to confirm.
9. Common Mistakes in Reporting Dental Benefits
- Incorrectly classifying cosmetic dentistry as non-taxable.
- Failing to report cash reimbursements as income.
- Miscalculating Health Spending Account (HSA) benefits.
10. How to Correct Errors on Your T4 Slip
If your T4 slip has incorrect dental benefit reporting:
- Contact your employer for an amended T4 (T4 Adjustments).
- File a dispute with the CRA if unresolved.
11. Impact of Dental Benefits on Your Tax Return
- Taxable dental benefits increase your income (Box 14 or 40).
- Non-taxable benefits do not affect your tax return.
- Medical expense tax credits may apply if you paid out-of-pocket.
$12. FAQs
Q1: Are all dental benefits taxable?
No, only certain types (e.g., cosmetic dentistry, cash reimbursements).
Q2: Where do I find dental benefits on my T4 slip?
Check Box 14, 40, or 85, depending on how they were reported.
Q3: Can I claim dental expenses on my tax return?
Yes, if you paid out-of-pocket and they exceed the medical expense threshold.
Q4: What if my employer didn’t report dental benefits correctly?
Request an amended T4 slip or consult the CRA.
13. Conclusion
Understanding dental codes on T4 slips ensures accurate tax reporting and avoids surprises at tax time. Employers must correctly classify benefits, while employees should review their T4s for errors. Non-taxable benefits (like group insurance) don’t affect income, but taxable benefits (like cosmetic dentistry reimbursements) do. Always verify with a tax professional if unsure.
14. Additional Resources
