Under the Income Tax Act, a government, municipality, or public authority may exclude up to $1,000 from amounts paid to:
- volunteer firefighters;
- volunteer ambulance technicians; and
- emergency service volunteers who help in the search or rescue of individuals, or in other emergency situations and disasters.
The $1,000 exemption only applies if the amount paid for the duties that the individual performs is a nominal amount compared with what it would have cost in the same circumstances to have the same duties performed by a regular full-time or part-time individual.
The $1,000 exemption does not apply if the individual was employed in the year by the same public authority for the same or similar duties (such as a full-time firefighter who, from time to time acts as a volunteer firefighter or rescue worker for his employer).
Individuals who receive a T4 slip with an exempt amount reported under code 87 may also qualify for the volunteer firefighters’ tax credit or the search and rescue volunteers’ tax credit. When eligible individuals file their income tax and benefit return they can choose to either receive an income exemption or claim a tax credit. For more information, go to Line 362 - Volunteer firefighters' amount and Line 395 - Search and rescue volunteers' amount.
Rules for CPP contributions, EI premiums, and income tax deductions
Amounts received by volunteers are treated differently under the Canada Pension Plan, the Employment Insurance Act, and the Income Tax Act.
The EI conditions below also apply for CPP purposes. However, if the individual qualifies for the exemption for income tax purposes, the employer should deduct CPP contributions only on the amount that is more than $1,000. If the individual does not qualify for the exemption, deduct CPP contributions on the total amount paid.
Even if an individual is considered to be a volunteer for income tax purposes, the amount received (including the amount of the exemption up to the maximum of $1,000) is insurable if the individual meets all of the following conditions:
- receives an hourly wage, salary, or other fixed amount of remuneration;
- adheres to a regular work schedule; and
- is available and obligated to intervene when an emergency (such as a fire) occurs during the schedule his or her employer set. However, if the individual must be available during the fixed work schedule, but he or she is not obligated to intervene when the emergency occurs, the amount the individual receives is insurable.
For more information on when employment of a person who participates in rescue operations or abating a disaster is pensionable or insurable, go to Rescue operations and/or abating a disaster.
As mentioned before, if the individual qualifies for the exemption, there is no income tax to pay on the first $1,000 he or she receives. Deduct income tax only on the amount that is more than $1,000. However, if the individual does not qualify for the exemption, deduct income tax on the total amount paid.
Report the exempt amount (up to $1,000) paid by a government, a municipality, or a public authority to an individual who performed firefighter or search and rescue duties as a volunteer using code 87 in the "Other information" area of the T4 slip. Do not report the exempt amount in box 14.
If you employed the individual (other than as a volunteer) for the same or similar duties, the whole amount is taxable. Include the whole amount in box 14 and do not use code 87. If you report income in box 14, you may have to report EI deductions and insurable earnings in box 18 and box 24 as well as CPP deductions and pensionable earnings in boxes 16 and 17 and box 26.
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