Turbotax: Emergency Volunteers deduction & Tax Exemption

 

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Relevant Material: "In Canada, emergency services volunteers can benefit from specific tax provisions that offer a choice between an income exemption on nominal pay or a non-refundable tax credit. The significance of these measures is to provide financial recognition and support for essential volunteer work that saves municipalities significant costs. 

Income Exemption Option
Volunteers who receive nominal compensation (e.g., an honorarium) from a government, municipality, or public authority may exclude up to $1,000 per eligible employer from their income. 
  • Eligibility: The amount paid must be nominal compared to what a full-time employee would receive for similar duties, and the individual cannot have been employed by the same authority for similar, paid duties during the year.
  • How to Claim: The exempt amount is reported in Box 87 of the volunteer's T4 slip and is not included in the taxable income reported in Box 14.
  • Significance: This exemption reduces the volunteer's total taxable income, potentially lowering their overall tax burden. 
Volunteer Firefighters' / Search and Rescue Volunteers' Tax Credit (VFTC/SRVTC) Option 
As an alternative to the $1,000 income exemption, eligible volunteers can claim a non-refundable tax credit. 
  • Eligibility: The volunteer must complete at least 200 hours of eligible volunteer services in the year. Eligible services can include responding to calls, attending meetings, and participating in training.
  • Credit Amount: For the 2024 and subsequent tax years, the credit is based on an amount of $6,000 (doubled from $3,000 in Budget 2024), providing a maximum tax savings of $900 annually (15% of $6,000).
  • How to Claim: To claim the credit, the volunteer must obtain certification of their hours from their department chief and report the full income (Box 14 + Box 87 of their T4 slips) on line 10100 of their income tax return. The credit itself is claimed on line 31220 (firefighters) or line 31240 (search and rescue).
  • Significance: This credit directly reduces the amount of federal income tax owed, recognizing the substantial time commitment (200+ hours) required for these essential services. 
Key Point: A Choice
Volunteers must choose between the $1,000 income exemption and the tax credit if they are eligible for both; they cannot claim both in the same tax year. This choice allows the volunteer to select the option that provides the most favourable tax outcome for their personal financial situation. .." (Google) 
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Relevant Material: "

Emergency services volunteers

Under the Income Tax Act, a government, municipality, or public authority may exclude up to $1,000 from amounts paid to any of the following individuals:

  • volunteer firefighters
  • volunteer ambulance technicians
  • 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 their employer).

Report the exempt amount (up to $1,000) using code 87 in the “Other information” area of the T4 slip. Do not report the exempt amount in box 14.

Note

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 31220 – Volunteer firefighters' amount and Line 31240 – 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.

CPP contributions

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.

EI premiums

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:

  • They receive an hourly wage, salary, or other fixed amount of remuneration
  • They adhere to a regular work schedule
  • They are available and obligated to intervene when an emergency (such as a fire) occurs during the schedule their employer set. However, if the individual must be available during the fixed work schedule, but they are not obligated to intervene when the emergency occurs, the amount the individual receives is not 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 / Abating a disaster.

Income tax

If the individual qualifies for the exemption, there is no income tax to pay on the first $1,000 that they receive. 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.

Reporting

Enter 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..." (Emergency services volunteers - Canada.ca)

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