The Working Income Tax Benefit (WITB) or Canada Workers Credit (CWB) is a refundable tax credit that supports many low-income workers in Canada. Based on 2016 records, the WITB provided benefit to more than 1.4 million Canadians, making the WITB an important and critical Canadian tax benefit.
To improve the financial security of low-income working Canadians, in the 2017 Fall Economic Statement, the Government announced that – from 2019 onward they would be allocating an additional $500 million annually to enhance this tax benefit. This will result in an increase in the Working Income Tax Benefit (WITB) amount and in the number of recipients.
For a better understanding of the WITB, the following is an overview of the existing WITB plan and the enhanced benefit amount (Canada Workers Benefit) that will be effective from tax year 2019 onward.
Working Income Tax Benefit (WITB) Overview
The working income tax benefit (WITB) is a refundable tax credit. That is, if the taxpayer’s tax liability is zero or less than the benefit amount, the taxpayer will receive a monetary benefit. This tax credit was introduced to encourage Canadians to join the workforce, along with providing tax relief to eligible working low-income individuals and families.
Currently, taxpayers may claim the WITB if their working income is over $3,000 per year, they are 19 years of age or older on December 31 of that year, and a resident of Canada for income tax purposes throughout the year. Filing a tax return is must to qualify for and claim the WITB.
However, if the taxpayer is enrolled as a full-time student at a designated educational institution for more than 13 weeks in the year; or confined to a prison or similar institution for a period of 90 days or more in the year; or is an officer of another country, such as a diplomat, or a family member or employee of such person but residing in Canada, they cannot claim the WITB tax credit.
The amount of the credit is based on the amount of the taxpayers working income as well as their total net income. Credits for couples are based on combined net income. A couple is an individual with an eligible spouse or eligible dependent.
Enhanced Working Income Tax Benefit (WITB) or Canada Workers Benefit 2019 Tax Year Onward
In the 2018 Federal Budget, the Working Income Tax Benefit was renamed as ‘Canada Workers Benefit’ (CWB), along with an increase in the benefit amount for qualifying taxpayers.
As part of the agreement to enhance the Canada Pension Plan, the Government will be increasing the WITB or CWB benefit amount from January 2019 onward
In 2018, both singles and couples must have working income of $3,000 or more to be eligible for the credit. The credit is equal to 25% of the working income above this threshold. Single individuals without children, are entitled to a maximum WITB of $1,059. The amount begins to get cut back if the adjusted net income is over $12,016 at a rate of 15%. The benefit is completely gone once the net income exceeds $19,076. For couples, the maximum benefit $1,922, phase-out begins at $16,593 and the benefit disappears when the combined net income exceeds $29,406.
With the changes, as of 2019, the WITB or CWB will provide a refundable tax credit of 26 per cent of each dollar of earned income in excess of $3,000.
This will result in the maximum refundable benefit amount increasing to $1,355 for single individuals and $2,335 for couples. The benefit is reduced at a rate of 14 per cent of each additional dollar above the phase-out threshold (projected to be $16,925 of net income for families and $12,256 for singles after indexation with inflation).
Individuals who are eligible for the Disability Tax Credit may also receive a WITB disability supplement. Disabled taxpayers currently qualify for additional WITB disability benefit of, up to $529 in 2018. The projected value for 2019 is $700..
These amounts differ for residents of Alberta, Quebec, Nunavut and British Columbia, as these jurisdictions have signed agreements to better align the WITB with their own programs.
As mentioned above, filing the Canadian income tax and benefits return is a must to qualify for the CWB (WITB) or any other government provided benefit. Individuals are advised to not forget to file their tax return for 2018 during 2019 tax season even if their income does not fall in the taxable income bracket, as they may qualify for the Canada Workers Benefit (CWB) or Workers Income Tax Benefit (WITB).
AG TAX LLP CAN HELP
If you have any tax-related queries, need assistance with tax planning or filing your tax returns please contact us. Our team comprises of highly experienced tax professionals with extensive knowledge of US and Canadian tax laws as well as cross-border compliance.
Furthermore, as a full service accounting firm, AG Tax assures complete assistance with even your most complex tax needs.
We can assist with:
- Canadian Personal and corporate tax returns
- Cross Border Taxation and Business Planning
- US Personal and Corporate Taxation
- Disclosure of Foreign Assets and other information filings
- Retirement planning
- Estate Planning, Inheritance tax advice
To obtain a quote or to arrange for a tax consultation to discuss your US Canada cross border tax queries, please contact us at:
- 604-538-8735 (Greater Vancouver Area, BC)
- 780-702-2732 (Greater Edmonton Area, AB)
Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.
