T4 Code 77 — Workers' compensation benefits repaid to the employer

Tax return implications

• Claim the code 77 amount at line 22900, other employment expenses. It reduces your taxable employment income.
• No Form T2200 is needed for this deduction. It is a repayment of employment income rather than an employment expense you incurred.
• The deduction is claimed for the year in which your employer reports it, which need not be the year the injury or the original salary payment occurred.
• If compensation was also paid to you directly, expect a T5007 as well, and use the line 14400 and line 25000 route for that amount rather than line 22900.
• Because the deduction sits at line 22900 it reduces net income, so it can also affect income-tested benefits and credits.

Common pitfalls & things to check

• Do not claim both a line 22900 deduction from code 77 and a line 25000 deduction from a T5007 for the same money. They describe two different flows and duplicating them leads to a reassessment.
• Code 77 is not an amount to add to income. It is a deduction figure, and adding it to box 14 inverts the effect it is meant to have.
• Where the top-up arrangement spans a year end, check that the salary in box 14 and the repayment in code 77 line up with the same period. A mismatch is worth raising with payroll before you file.
• Your employer must have reported the original amount as employment income on your T4 for code 77 to be appropriate. If the salary was never taxed there is nothing to offset.

Related T4 boxes