Are You Considered a Low-Income Worker?

By Randall Orser | Personal Income Tax

In 2007, the government at the time established a refundable tax credit for those Canadians who are working but have a low income, and not attending post-secondary education called the Working Income Tax Benefit (WITB). It was thought this would encourage Canadians to enter the workforce. A refundable tax credit is one that you actually get the money back rather than added to your other non-refundable credits. For some clients, this has meant going from a balance owing to getting a refund, which is always nice. Who qualifies and what do you get with the WITB?

Are you eligible for the WITB?

You are eligible for the WITB if:

  • You are 19 years of age or older on December 31st; and
  • You are a resident of Canada for income tax purposes throughout the year.

If you are under 19 years of age, you may still be eligible for the WITB, if you have a spouse or common-law partner or an eligible dependent on December 31st.

You are not eligible for the WITB if:

  • You do not have an eligible dependent and are enrolled as a full-time student at a designated educational institution for more than 13 weeks in the year;
  • You are confined to a prison or similar institution for a period of 90 days or more in the year; or
  • You do not have to pay tax in Canada because you are an officer or servant of another country, such as a diplomat, or a family member or employee of such person.

If you are eligible for the WITB and the disability amount, you may also be eligible to claim an annual disability supplement. To be eligible for the disability supplement, your working income must be over $1,150 and the Canada Revenue Agency (CRA) must have an approved Form T2201, Disability Tax Credit Certificate on file. If you have not already sent the CRA a completed Form T2201, you must do so to receive the disability supplement.

Some provinces/territories have exercised the option to reconfigure the WITB calculation based on specific social and economic realities. The CRA will determine the amount of WITB to pay based on the eligible individual's province or territory of residence at the end of the year.

For WITB purposes, you have an eligible dependent if you have a child who, at the end of the year:

  • lives with you;
  • is under 19 years of age; and
  • is not eligible for the WITB.

For WITB purposes, eligible dependents can be registered by completing Form RC66, Canada Child Benefits Application. However, if your dependents are already registered for the goods and services tax/harmonized sales tax (GST/HST) credit, the CRA will automatically take them into consideration when calculating your WITB amount.

For WITB purposes, an eligible spouse at the end of the year is a person who meets all of the following conditions:

  • is your spouse or common-law partner on December 31st;
  • is a resident of Canada throughout the year;
  • is not enrolled as a full-time student at a designated educational institution for a total of more than 13 weeks in the year, unless he/she has an eligible dependant at the end of the year;
  • is not confined to a prison or similar institution for a period of 90 days or more during the year; and
  • is not an officer or servant of another country, such as a diplomat, or a family member or employee of such person.

Family net income is an individual's net income added to the net income of their spouse or common-law partner, minus any amount reported for Universal Child Care Benefit (UCCB) (line 117 of the Income Tax and Benefit Return). Net income is the amount on line 236 of the Income Tax and Benefit Return.

Working income for a tax year is the total amount of an individual's or family's income for the year from employment and business (excluding losses).

How is the working income tax benefit (WITB) calculated?

The WITB is calculated using the following information:

  • marital status; province or territory of residence; working income; net income; eligible dependent; and eligibility for the WITB disability supplement.

To see how the WITB is calculated, please refer to the calculation sheet applicable to you, or you can use the Canada Revenue Agency (CRA) Child and family benefits calculator to get an estimate of your benefit.

What is the maximum amount of WITB you may receive?

WITB is intended for low-income individuals and families who have working income earned from employment or business.

For single individuals without children, the maximum amount of WITB is paid if working income is between $7,112 and $11,675 for 2016. The WITB payment is gradually reduced when net income is more than $11,675 (this is referred to as the base threshold). No WITB is paid when net income exceeds $18,529. These amounts vary slightly for residents of Alberta, Quebec, Nunavut and British Columbia.

For families, the maximum amount of WITB is paid if the family's working income is between $10,472 and $16,122 for 2016. The WITB payment is gradually reduced when family net income is more than $16,122 (this is referred to as the base threshold). The WITB payment is reduced to zero once family net income exceeds $28,576. These amounts vary slightly for residents of Alberta, Quebec, Nunavut and British Columbia.

For single individuals and families who are eligible and entitled to WITB disability supplement, the income thresholds will be a bit higher. See here.

Check here for the income levels.

The WITB can be quite beneficial to low-income, working Canadians, and was designed to give them a break on their taxes, as well as encourage those not yet in the workforce to do so.

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