Every Benefit, One at a Time

Not Taxable · No Slip · Not on the Return

Disability pension. The monthly pension under the Pension Act, with its additional amounts for a spouse and children. Exempt by paragraph 81(1)(d).

Pain and Suffering Compensation. Monthly or as a lump sum, exempt by name. So is the monthly amount VAC has paid since April 2019 to people who took the earlier disability award as a lump sum, and so was the award itself.

Additional Pain and Suffering Compensation. Exempt by name. VAC's own page calls it a tax-free monthly benefit.

Critical Injury Benefit. A tax-free lump sum, exempt by name.

Attendance Allowance and Exceptional Incapacity Allowance. Both are paid under the Pension Act to disability pensioners, and both are exempt with it.

Clothing allowance. Exempt under whichever Act pays it.

Detention benefit and Prisoner of War Compensation. Both tax-free on VAC's own pages, and the detention benefit by name in the Act.

None of these comes with a tax slip, and none belongs anywhere on your return. Because they are excluded from income altogether, they also don't count against the credits and benefits that are income-tested, which is part of why mixing one up with the taxable list costs real money.

Not Taxable · Income-Tested, but Not Income

Canadian Forces Income Support. A monthly benefit for low-income veterans, survivors and orphans, usually after the Income Replacement Benefit ends. It is income-tested, so VAC looks at your other income to set it, but it is not itself income: exempt by name.

War Veterans Allowance. Tax-free under the War Veterans Allowance Act, which paragraph 81(1)(d) covers whole.

Veterans Emergency Fund. VAC describes it as non-taxable support, and it arrives with no slip.

Caregiver Recognition Benefit. Paid to the person you name as your caregiver, not to you, and tax-free in their hands: exempt by name.

Not Taxable · Services and Reimbursements

Most of what VAC does isn't money at all, and the money that comes with it is exempt as a block. Everything paid under the Veterans Health Care Regulations is excluded from income: treatment benefits, the Veterans Independence Program's housekeeping and grounds-maintenance payments, and the costs of getting to treatment. The benefits that come with a rehabilitation or vocational assistance plan are exempt by name. Career Transition Services is a service; there is nothing to report.

The CAF's own benefits for ill and injured members are on the same list: home and vehicle modifications, home assistance, attendant care, the caregiver benefit, a spouse's education upgrade, funeral and burial expenses, next-of-kin travel, and the Department's reimbursement of education expenses for ill and injured members. If you received one of those while still serving, it is not income.

Taxable · The Income Replacement Benefit

Before 65. The IRB replaces income and is taxed as income. VAC calls it a taxable monthly benefit, and each year it comes on a T4A. The amount sits in box 127, Veterans' benefits, and goes on line 10400 of your return with other employment income. If the IRB is one of several slips in a year, our release-year guide covers how the pieces combine.

At 65. For a veteran with a diminished earning capacity, the IRB continues for life at 70 percent of what was payable before 65, less offsets. The Act treats that continuation differently. The amount determined under the over-65 rule is reported in box 128, Veterans' benefits eligible for pension splitting, and included in box 016, so it goes on line 11500 with pension income instead of line 10400. From that point it counts toward the pension income amount and can be split with a spouse or common-law partner on the joint election, in the same way as a CAF annuity.

The old programs. If you were on the Earnings Loss Benefit, the Career Impact Allowance or the Retirement Income Security Benefit before April 2019, you were moved to the IRB, and some protected amounts carried over: a monthly amount that preserves a Career Impact Allowance increase you had, and a one-time lump sum equal to 2 percent of past earnings loss benefits that replaced the Supplementary Retirement Benefit. Those are taxable and arrive in box 127 with the rest. The Retirement Income Security Benefit became the over-65 IRB, and sits in the pension-splitting group with it.

Taxable · The Education and Training Benefit

The Education and Training Benefit is taxable in the year VAC pays it. VAC's applicant guide says the amounts are reported to the CRA and that nothing is withheld from them, so a year of school funded by it is a year to set money aside for April.

Taxable · Not VAC, but on the Same Desk

Your CAF pension. The annuity from the Canadian Forces Superannuation plan is taxable, comes on a T4A from the Pension Centre, goes on line 11500, and is eligible pension income at any age: the pension income amount and pension splitting both apply from the first payment. The benefits guide and the release-year guide both cover it.

CAF long-term disability. The plan's own page says it plainly: the benefit is taxable because it is a wage-loss replacement benefit the CAF partly pays for, and Manulife issues a T4A for every year it is paid. The amount is in box 107 and goes on line 10400. There is one deduction to take: the premiums you paid yourself during your career can be deducted from the benefit, and Manulife provides a letter with the total. Keep it. The amount is deducted against the benefit until it is used up, and never twice.

CPP disability. A CPP disability benefit is taxable. It comes on a T4A(P), in box 16, and is reported on line 11410 as part of the total CPP in line 11400. The IRB is paid net of amounts from other sources and VAC checks those against CRA data, so the two are usually assessed together.

The Household · Survivors, Orphans, Caregivers

Income Replacement Benefit for survivors and orphans. Taxable, like the veteran's, and VAC says so on its page. Until the month the veteran would have turned 65, the survivor's share is half of what the veteran would have received; after it, the whole benefit drops to 70 percent. That after-65 amount is the one the Act treats as pension income: it goes in box 128 and on line 11500, and it counts toward the survivor's own pension income amount.

Death Benefit. A lump sum to a surviving spouse and children on a service-related death: exempt by name.

Survivor's pension. Paid under the Pension Act, and exempt with it.

Canadian Forces Income Support for survivors and educational assistance for children: both tax-free, the first by name in the Act and the second on VAC's own page.

Caregiver Recognition Benefit. Tax-free to the caregiver who receives it, as above.