10 tax benefits that low-income Canadians should be aware of

To read more chapters, click below:

Chapter 2: Applying for Canada Workers Benefit

Chapter 3: How to apply for GST/ HST credit in 2023?

Chapter 4: All you need to know about Canada Child Benefit

Chapter 5: 8 ways in which Canada’s New Affordability Plan helps make life cheaper for you

Chapter 6: All that you need to know about Canada Dental Benefit

Chapter 7: Ontario – Income Tax Brackets, Rates, & Provincial Tax Credits

Chapter 8: Quebec – income tax brackets, rates, and provincial tax credits

Chapter 9: Understanding the Tuition Tax Credit in Canada: All You Need to Know

Chapter 10: Understanding Canada Training Credit

Chapter 11: Maximizing Your Tax Return: Uncovering the Benefits of Seniors' Tax Credits in Canada

Chapter 12: Canada Taxes 2022: Federal Tax Brackets, Rates and Credits

 Not filing your tax returns can result in missing out on valuable benefits and credits. Canada offers various federal and provincial tax incentives to assist individuals with low incomes, but to take advantage of these opportunities, it's crucial to complete and submit your tax return.

If you find yourself in financial difficulties as a low-income Canadian, here are ten strategies to help you either save money or boost your income by fulfilling your tax obligations.

What is considered low income in Canada?

Low income in Canada is typically defined based on the Low-Income Measure (LIM) and the Low-Income Measure After Tax (LIM-AT). These measures take into account a person's or family's after-tax income and the size of the family unit. The defined criteria for what constitute low income may fluctuate based on the Canadian region and the size of the family. However, the LIM-AT is often used as a guideline.

As per the last update in September 2021, the LIM-AT was defined as 50% of the median after-tax income in Canada. In practical terms, if a person's or family's after-tax income is below this threshold, they are considered to be in low income. It's important to note that the threshold can change over time due to factors like inflation and changes in economic conditions.

10 tax benefits for low-income Canadians

1. Canada Workers Benefits

The Canada Workers Benefit (CWB) is a federal tax credit program in Canada with the primary objective of offering financial support to individuals and families with low income who are actively employed. It is designed to help those who are part of the workforce and facing financial challenges due to their low earnings. The CWB is intended to provide them with additional financial relief to improve their financial well-being and enhance their quality of life. The CWB was introduced to replace and expand upon the Working Income Tax Benefit (WITB) program.

The Canada Workers Benefit (CWB) is a tax credit that provides financial assistance to low-income individuals and families who are part of the workforce. For the 2022 tax year, single individuals who meet the eligibility criteria can receive a maximum benefit of $1395.

2. Canada Child Benefit

The Canada Child Benefit (CCB) is a tax-free financial assistance program provided by the Canadian government to help eligible families with the cost of raising children. If you meet the eligibility requirements, the CCB offers tax-free monthly payments to families with children below the age of 18 years. It is intended to help cover the costs associated with raising children, including expenses for food, clothing, and other essential needs.

In the benefit year spanning 2022-2023, families meeting the eligibility criteria have the opportunity to receive a maximum amount of $6,997 per child. The exact sum you are entitled to is determined by your family's income and the number of dependents you have. To ensure that you continue to receive uninterrupted monthly payments, it is crucial to file your annual tax return in a timely manner.

To be eligible for the Canada Child Benefit (CCB), it is necessary to be a resident of Canada. You can apply for the CCB by completing Form RC66, which is the official Canada Child Benefits Application. This process allows you to access the financial support designed to assist families in providing for their children's well-being.

3. GST/ HST Credit

The GST/HST Credit is a tax-free financial assistance program provided by the Canadian government. Its purpose is to aid individuals and families with low to moderate incomes in covering the expenses associated with the Goods and Services Tax (GST) and the Harmonized Sales Tax (HST) that they are required to pay. The GST/HST Credit is designed to offset some of the taxes individuals and families pay on goods and services through the GST and HST. It is a form of financial support provided to help with the cost of living.

The credit amount fluctuates, with values spanning from $467 to $612, contingent on your net income and family circumstances. Nonetheless, if your income exceeds a specific limit, you no longer qualify for this credit.

4. Canada Housing Benefit

As part of Canada's new Affordability Plan, the Canada Housing Benefit is a one-time payment, The Canada Housing Benefit is part of the new Affordability Plan in Canada, offering a one-time payment that could be as much as $500. The amount you receive is determined by your income and rental expenses. To be eligible for this benefit, your monthly rent in the year 2021 should represent at least 30% of your income. For example, if your 2021 income was $20,000, your rent should be a minimum of $500 per month to meet the requirements.

To apply for this benefit, you must meet the following criteria:

You have filed your 2021 tax return.

You are a Canadian resident and are at least 15 years old.

You are currently paying rent for your residence.

You need to provide your landlord's contact information and give consent for the Canada Revenue Agency (CRA) to verify your details.

To claim this payment, you should complete your 2021 income tax return and provide information about your housing situation when the application period is open. It's important to note that the application deadline is March 31, 2023.

Refundable provincial credits

Apart from the numerous federal tax credits accessible to individuals with low incomes in Canada, several provinces and territories also provide supplementary benefits.

• Ontario Trillium Benefit

The Ontario Trillium Benefit (OTB) is a financial assistance program provided by the Government of Ontario to help eligible individuals and families with the cost of living expenses, including housing costs and energy bills. The OTB is a combination of three tax credits –

1. Ontario Energy and Property Tax Credit
2. Ontario Sales Tax Credit
3. Northern Ontario energy Credit

Key points to know about the Ontario Trillium Benefit are –

1. The OTB is available to Ontario residents who meet the eligibility criteria, including income thresholds.
2. To receive the benefit, you must file an income tax return each year. The benefit is usually calculated based on the information provided in your tax return.
3. The amount of the benefit can vary from year to year based on changes in your income, household composition, and other factors.
4. The OTB is typically paid on a monthly basis, but there may be some lump-sum payments depending on your situation.
5. You can apply for the OTB when you file your income tax return, or you can update your information if your circumstances change during the year.

• Quebec Credits

For residents of Quebec, there are several noteworthy tax credits to consider -

1.  Quebec Family Allowance: Similar to the CCB, the Quebec Family Allowance offers monthly, tax-free payments to families residing in Quebec with children under 18 years old. The credit amount varies, ranging from $389 to $2,782 for each family. To apply for this credit, you must file your tax return and complete the necessary provincial forms.
2.  Quebec Refundable Cost of Living Tax Credit: This tax credit can provide a refundable credit of up to $600 if your net income is below $104,000, provided you file your 2021 tax return by June 30, 2023. Eligible individuals will receive this credit automatically.
3. Solidarity Tax Credit: The solidarity tax credit is a refundable tax credit tailored for individuals with low to moderate income in Quebec. The credit amount varies depending on your income and marital status. Please note that eligibility criteria, credit amounts, and application procedures may change, so it's crucial to consult the official Quebec government website or reach out to the relevant authorities for the latest information on these tax credits.

5. Canada Dental Benefit

The Canada Dental Benefit is a temporary program created to ease the financial strain of dental costs for qualifying families. It is specifically aimed at families with an annual income of under $90,000 and encompasses children under the age of 12 who have received dental treatments during specific periods. The initial benefit period is directed at children aged 12 or younger as of December 1, 2020, who have undergone dental care between October 1, 2022, and June 30, 2023. During this time, eligible families can access financial support to help cover the costs associated with their children's dental treatments.

The aim of this temporary benefit is to enhance access to essential dental services for families who may face financial challenges. It acknowledges the importance of oral health for children and strives to make dental care more accessible and affordable for those in need.

6. Tuition tax credits

In Canada, tuition tax credits are a tax benefit designed to help students offset the cost of post-secondary education. These credits can be claimed by eligible students or their parents or guardians to reduce their federal and provincial income tax liability. There are two types of tuition tax credits –

• Federal Tuition Tax Credit: This credit is available at the federal level and allows eligible students to claim a percentage of their eligible tuition fees paid during the tax year.
• Provincial Tuition Tax Credits: Most provinces and territories also offer their own tuition tax credits, allowing students to claim a percentage of their eligible tuition fees paid at the provincial level.

As a student, you can take advantage of the opportunity to request tuition tax credits and the Canada Training Credit when filing your tax return. The tuition tax credit allows you to claim tuition fees of up to $5,000 per year.

If you have been enrolled in an officially recognized educational institution, you can include these amounts in your tax return. You should have received a T2202 form from your educational institution, which contains all the necessary details for making a claim for tuition credits on your tax return. Furthermore, you have the flexibility to either carry forward tuition tax credits to a future tax year or transfer them to a spouse or common-law partner. In addition to this, there is also the option to transfer tuition amounts to a parent.

7. Basic Personal Amount

In Canada, the Basic Personal Amount (BPA) is a non-refundable tax credit that allows individuals to earn a certain amount of income tax-free. It is designed to help low and middle-income individuals reduce their tax liability. The BPA is adjusted annually to account for inflation and changes in the cost of living.

As per the last update in January 2022, the federal BPA for the 2021 tax year was $13,808. This means that individuals could earn up to $13,808 in taxable income without having to pay federal income tax on that portion of their income. It's important to note that provinces and territories in Canada may also have their own Basic Personal Amounts, and the specific amounts can vary by jurisdiction. Please note that the specific amount of this tax credit can differ from one province to another.

8. Tax credits for senior citizens

Senior citizens in Canada may be eligible for various tax credits and benefits to help them with their financial well-being during retirement. Here are some of the tax credits and benefits available to senior citizens in Canada –

• Age Amount

The Age Amount tax credit is available to individuals aged 65 or older. It allows seniors to claim a non-refundable tax credit, which reduces their federal tax liability. The amount varies annually and is designed to provide financial relief to seniors.

• Split-Pension Income

Seniors who are married or in a common-law partnership may have the option to split eligible pension income with their spouse or partner, which can result in lower overall taxes. In Canada, "split pension income" refers to a tax provision that allows eligible pensioners to split a portion of their eligible pension income with their spouse or common-law partner for tax purposes. This income-splitting strategy can help reduce the overall tax liability for a household by allocating some pension income to the lower-earning spouse or partner, who may be in a lower tax bracket. Not all pension income is eligible for splitting. The Canada Revenue Agency (CRA) designates specific pension income sources that qualify, including registered pension plans (RPPs), registered retirement savings plans (RRSPs), annuities, and certain other retirement income streams.

• Home Accessibility Tax Credit (HATC)

Seniors who make their homes more accessible may be eligible for HATC. The Home Accessibility Tax Credit (HATC) is a non-refundable tax credit in Canada that was introduced to help individuals with disabilities or seniors make their homes more accessible and safer. The credit is intended to offset some of the costs associated with home renovations or improvements that enhance accessibility and mobility within the home. It is a federal tax credit and was first introduced in 2016.

The HATC covers a range of eligible renovation expenses, such as the installation of wheelchair ramps, lifts, accessible bathtubs, and walk-in showers. It may also include the widening of doorways, installation of handrails, and modifications to kitchens or bathrooms to accommodate mobility challenges.

• Quebec Independent Living Tax Credit

The Quebec Independent Living Tax Credit (Crédit d'impôt pour maintien à domicile) is a provincial tax credit in the Canadian province of Quebec. It is designed to provide financial assistance to individuals who are 70 years of age or older and wish to remain living independently in their own homes or in private residences for seniors, rather than moving to long-term care facilities. The amount of the tax credit can vary based on factors like the individual's age, marital status, and their level of autonomy in daily activities. The credit can be substantial and is meant to assist with the costs of maintaining an independent lifestyle.

9. The Canada Training Credit

The Canada Training Credit (CTC) is a federal tax credit introduced by the Canadian government to help workers gain new skills and enhance their employability. The CTC is designed to assist individuals with the cost of enrolling in eligible educational and training programs. It was introduced as part of the Canada Training Benefit and is intended to make it easier for Canadians to adapt to the changing job market and upgrade their skills. To be eligible for the Canada Training Credit, you had to meet certain criteria, including being a Canadian resident for tax purposes, being at least 25 years old, and having a valid Social Insurance Number (SIN).

The CTC can be used to offset the cost of eligible training and educational programs. Individuals can claim up to half of their eligible tuition and fees, subject to annual and lifetime limits. The credit can be claimed on their income tax return. The credit amount was calculated based on a percentage of your eligible earnings for the year. To qualify for the CTC, educational or training programs must be provided by eligible institutions and lead to a recognized degree, diploma, or certificate. The programs should help improve employability and job skills.