Taxes and Benefits for Indigenous Peoples — Montreal CPA Firm Near You: Tax Exemptions, Filing Rules, Credits, and CRA Benefits

Indigenous Peoples in Canada face unique tax circumstances due to the Indian Act, Section 87 tax exemptions, and various federal benefits and credits available through the CRA. Understanding which income is tax-exempt, when to file a return, what benefits you may qualify for, and how to access free tax-filing help can make a significant difference in your financial well-being. Many Indigenous individuals earn income that may be exempt from tax when connected to a reserve, while others receive taxable benefits that must be reported. Filing a return remains essential, even if all or part of your income is tax-exempt, because benefits, credits, and provincial payments depend on annual tax filings.

This guide provides a complete overview of what Indigenous Peoples should know about personal taxes, including eligibility for tax exemptions, how to report exempt and non-exempt income, which benefits require tax returns, how to get free assistance, and what programs exist to support Indigenous children, families, and northern communities. Whether your income is employment-related, pension-based, from self-employment, or connected to reserve lands, understanding how the CRA applies the law ensures proper compliance and access to available financial support.

Legal and Regulatory Framework

Section 87 of the Indian Act exempts the personal property of First Nations individuals who are registered or entitled to be registered under the Indian Act when the property is “situated on a reserve.” Personal property includes income earned on reserve, certain employment-related benefits, and other taxable amounts when specific conditions are met. Determining tax exemption depends on factors such as where you work, where your employer is located, where you live, and how closely your income is connected to a reserve.

Tax-exempt income can include employment income, Employment Insurance, Canada Pension Plan benefits, Quebec Pension Plan benefits, Registered Pension Plan benefits, retiring allowances, and wage-loss replacement benefits when the eligibility criteria are met. However, not all income is exempt. Federal programs such as Old Age Security, the Guaranteed Income Supplement, U.S. Social Security benefits, and pension income from the United States are taxable for Indigenous Peoples, even if they live on reserve. For this reason, individuals must understand which amounts are exempt and which must be reported.

The CRA requires that individuals with exempt income under Section 87 complete Form T90 to calculate net exempt income if they are registered or entitled to be registered under the Indian Act and earned exempt income. Filing a return is still necessary to receive benefits, credits, and refunds. Provincial tax rules may also apply differently depending on the location and type of income.

Special rules apply for Indigenous government lands, which may or may not qualify as reserves for purposes of exemption. If uncertain, individuals are encouraged to contact their band council or Indigenous and Northern Affairs Canada.

Key Court Decisions

Court decisions interpreting Section 87 of the Indian Act have shaped how tax exemption is applied. In Williams v. The Queen, the Supreme Court of Canada emphasized the need to examine the “connecting factors” between the income and the reserve—where the work was performed, where the employer is located, and where the employee lives. These connecting factors guide the CRA in determining whether income is considered situated on a reserve.

In other rulings, courts have reinforced that exemption applies strictly to income that has a clear and substantial connection to reserve lands. The burden of proof rests with the taxpayer to demonstrate eligibility. The courts have also upheld the requirement to file tax returns even if income is exempt, particularly when individuals want to receive federal and provincial benefits.

These decisions highlight the importance of documentation, clarity, and understanding your work arrangements. Taxpayers uncertain about exemption eligibility benefit greatly from professional advice.

Why CRA Targets This Issue

The CRA monitors Indigenous tax situations closely to ensure that individuals receive proper exemptions while also reporting taxable income when required. Issues that commonly lead to CRA reviews include:

• misclassifying income as exempt
• failing to file returns for exempt income
• misunderstanding how off-reserve work affects exemption
• improperly reported U.S. pension or Old Age Security benefits
• claiming benefits without filing returns
• missing T90 forms
• questions about whether a worksite qualifies as “on reserve”
• rental or business income earned off reserve
• incorrect reporting of employment where employer is off-reserve

Because exemptions depend on specific facts, the CRA may request documentation to confirm eligibility. Filing accurately and on time ensures uninterrupted benefits and lowers the risk of review.

Mackisen Strategy

Mackisen provides specialized guidance to Indigenous clients to help them understand which income is exempt under Section 87, what needs to be reported, and how to file correctly. We carefully review where work was performed, employer location, residency status, and other connecting factors to determine which income is taxable or exempt. We assist with completing Form T90, calculating net exempt income, and ensuring benefits such as the Canada Child Benefit, GST/HST Credit, Disability Tax Credit, and various provincial programs are processed correctly.

We also help clients file returns even when they had no income or fully exempt income, ensuring they do not miss out on benefits. For individuals receiving taxable pensions, OAS, GIS, or U.S. retirement income, we provide proper reporting and optimize deductions to reduce tax payable. For self-employed Indigenous clients, we determine whether business income qualifies for exemption and help structure business operations responsibly.

Mackisen also supports Indigenous students, seasonal workers, elders, newcomers, and individuals living on Indigenous government lands. We offer guidance on residency-related rules, tax slips, credits, and unique provincial programs. For communities in northern regions, we help navigate Northern Residents Deductions and support small businesses through CRA’s Liaison Officer services.

Real Client Experience

A client working for a band-operated school was unsure whether their income was exempt. After reviewing employment conditions, we confirmed exemption eligibility and assisted with completing Form T90. They filed their return, received benefits, and avoided CRA reassessment.

Another client lived on reserve but worked for an off-reserve employer. The CRA considered their income taxable. We secured proper documentation, demonstrated a strong connection to the reserve through work arrangements, and successfully argued for exemption.

A senior with exempt employment income and taxable OAS benefits was confused about what to report. We filed both exempt and taxable portions correctly and ensured they received provincial and federal benefits.

A seasonal agricultural worker from another country worked temporarily on reserve lands. We determined withholding requirements, filed the proper return type, and secured a refund of over-withheld tax.

A northern community member needed help filing returns and accessing benefits. With help from Northern Service Centres and CRA’s specialized Indigenous programs, we coordinated a complete filing and unlocked several credits.

Common Questions

What income is tax-exempt under Section 87?
Employment income and certain benefits with a strong connection to reserve lands may be exempt.

Do I still need to file if all my income is exempt?
Yes. Filing is required to receive benefits and credits.

Do Indigenous Peoples receive the same benefits?
Yes. Benefits such as CCB, GST/HST Credit, and Disability Tax Credit are available to all who file returns.

What is Form T90?
It is used to calculate net exempt income when income is exempt under Section 87.

Are OAS and GIS exempt?
No. These benefits are taxable for Indigenous Peoples.

Can I file a simplified paper return?
Yes. Some Indigenous communities provide simplified forms for credit and benefit calculations.

Is tax software available?
Yes. Indigenous Peoples can file online using CRA-certified tax software.

Where can I get free help?
Free clinics, friendship centres, band councils, northern service centres, and CRA programs offer support.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses stay compliant while recovering the taxes they’re entitled to. Whether you’re filing your first GST/QST return or optimizing multi-year refunds, our expert team ensures precision, transparency, and protection from audit risk.