Tax Implications for Room and Board

Employers need to include room and board somewhere in the calculation of their nanny’s payroll. The Canadian Revenue Agency (CRA) states that free housing and meals provided to an employee is a taxable benefit and must be reported.  However, most employers charge up to the maximum amounts allowed by Employment Standards.  Each province’s maximums are different, and so employers need to check what is allowable in their province.  The question then becomes whether a taxable benefit still needs to be calculated.  The answer is – that depends.

What is room and board?

When you have a live-in employee, and you as the employer are providing a place for them to live and eat, this known as “room and board” or “board and lodging”. This amount includes rent and any meals that you provide to them while they are in your home. Each province has a set maximum amount that an employer may charge for a private bedroom, and meals to an employee. In Ontario, the current maximum amount is $85.25 per week, made up of $31.70 for rent and $2.55 per meal, 3 meals per day, for 7 days per week.

Some employers subtract this amount weekly from the employee’s cheque, while others choose not to subtract it from the salary at all. But – if they are not charging, room and board still needs to be accounted for.  How?  It is treated as a taxable benefit. It is important that the method be written into the nanny contract so that everyone is on the same page, and that there aren’t any surprises on payday or during tax season.

How is room and board treated in regards to salary?

Smart employers put room and board in the nanny contract so that everyone is on the same page. If the employer is going to include room & board as a taxable benefit, the question becomes “what is the value of the benefit?”  The CRA states that if you provide free board and lodging, “you have to add to the employee’s salary the fair market value of the board and lodging you provide”.  So, you may need to do some research to determine how much of a taxable benefit should be added to the nanny’s pay.

How does a taxable benefit work?  For example, if your nanny makes $11/hour in Ontario and works 40 hours week, the pre-tax salary amount is $440. If you are not deducting room in board from the net cheque amount, and determine that the market value of the free room & board you are providing is $200/week, then the taxes and deductions will be based on a grossed-up amount of $640/week.

Keep it accurate and up to date to prevent penalties!

If you feel overwhelmed, you are not alone! Many people turn to tax professionals and payroll specialists so that they don’t have to worry about getting the numbers right.  And many think that they have it under control, only to have a wake-up call when T4 season rolls around.  At www.nannytax.ca, the experts will do the math for you, handle the updates, paystubs, CRA payments, and send you the required tax forms at the end of the year.  As the first in Canada to provide “nanny tax frustration relief”, you can enjoy the benefits of having a nanny, and spend more time with your family without the hassle of nanny payroll.

About the Author

Deborah Shure is the owner and founder of www.nannytax.ca, the premier nanny payroll service in Canada.  With over 25 years of combined financial experience, Deborah and her team are the most trusted source of nanny payroll information.  When she isn’t busy providing “nanny tax frustration relief”, Deborah is spending time with her 3 kids doing all the things that supermoms do!”

ABOUT THE AUTHOR

ALLAN MADAN

CPA, CA

Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.

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