Danielle Kubes is a trained journalist and investor who has written about personal finance for the past six years. Her writing has been published in The Globe and Mail, National Post, MoneySense, Vice and RateHub.ca. Danielle writes about investing and personal finance for Wealthsimple. She has a Bachelor of Humanities from Carleton University and a Master of Journalism from Ryerson University.
The Working Income Tax benefit (WITB) provides more than $1.1 billion in benefits to over 1.4 million Canadians each year. Its replacement, the Canada Workers Benefit program, which was announced in 2018 and implemented in 2019 is an attempt to “invest in the middle class,” which has been suffering wage stagnation. Since this is the first year the government is implementing CWB we will need to wait for the exact data, but the government estimates an additional 300,000 Canadians will receive the benefit.
The cost to taxpayers is estimated to be an additional $1 billion annually, plus $4 million over two years to advertise the program and increase awareness.
How does the CWB work?
The benefit kicks in when you begin to earn employment income of $3,000. You get 26% of every dollar you earn above that amount, until the maximum benefit is reached for your family situation and province. When your household taxable income reaches a specific threshold, the benefits are reduced by 12% until it is completely eliminated, at a higher threshold. Only one person per household can receive the CWB, but each spouse may receive an additional disability supplement if they are both eligible.Easy, fast, and even fun. Wealthsimple Tax is CRA-certified tax software that you’ll actually want to use. And you only pay what you want, no catch — get started.
The benefit comes in the form of a refundable tax credit. Normally, your tax refund cannot exceed what you actually paid in tax—the CRA is merely refunding an overpayment. In the case of a refundable tax credit, the CRA dips into its own coffers to pay you.
You can choose to get the exact amount in a lump sum once a year, or spread it out throughout the year (half the estimated amount in four advance payments throughout the year, and the rest in a lump-sum after your taxes are assessed).
Changes from the WITB to the CWB
The government upgraded four aspects of the CWB compared to the WITB:
Easier access: The CRA now calculates CWB for all tax filers, even if you don’t specifically claim it. Anyone who files their taxes will be assessed for eligibility.
Bigger benefit: The CWB gives a single person a maximum of $1,355 instead of $1,059 for the WITB, and a household a maximum of $2,335 versus $1,922. The maximum CWB payment varies for residents of Alberta, Nunavut and Quebec (see table below). A worker earning $15,000 would get $500 more from the CWB than they would have received from the WITB.
Lower clawback rate: Your benefit is reduced by 12% for every dollar that your taxable household income exceeds the threshold, compared to 15% for the WITB. The income threshold at which clawbacks begin have also been raised, to $13,064 for individuals and $17,348 for families, compared to $12,016 and $16,593, respectively.
Higher income threshold: A single person in most provinces can earn up to $24,112 before losing eligibility for CWB, whereas they could only earn up to $19,076 for the WITB. Families can earn up to $37,173 instead of $28,975. Again, only one person in the household can receive the CWB.
Canada workers benefit (CWB) eligibility
To receive the CWB, you must be:
At least 19 years old by the end of the tax year
Under 19 years old, but have a spouse, a common-law partner or a child that lives with you
A resident of Canada for income tax purposes throughout the year
Earn $3,000 from employment or self-employment, but have total taxable income of less than $24,112 for singles or $37,173 for families
You are not eligible for CWB if you are:
A full-time student for more than 13 weeks in the year, unless you have a child who lives with you
In prison for 90 days or more during the year
Not required to pay tax in Canada because you are a diplomat or in a similar situation
You are eligible for the disability supplement if you:
Receive the Disability Tax Credit
Employment income is at least $1,150
Are eligible for the CWB
How your CWB benefit is calculated
The amount you receive is based on the following factors:
Province or territory of residence
Eligibility for the disability supplement
You must first add up for yourself and an eligible spouse any:
Taxable scholarships, fellowships, bursaries and artist project grants
Self employment income
It is optional to declare any tax exempt working income earned on a reserve, or an allowance received as an emergency volunteer
If your spouse is ineligible to receive the CWB, and you also do not have a child living with you, you must calculate your CWB as if you were single. Leave out any of your partner’s income. Your benefit will be calculated and distributed as if you were unattached.
For example, if you are childfree and your husband has been in prison for six months, then you do not need to include any of his income and you will receive a maximum benefit of $1,355.
Otherwise, you must include your total household taxable income and one of you will receive the CWB. If you can’t decide which partner will get the money then the CRA will decide for you.
Next, if your working income is above $3,000 then you must determine your taxable income for the purposes of the benefit (also called net adjustable income). The following applies:
Net income on line 23600 (previously known as line 236) on your return. This is all sources of income, such as pensions, capital gains, social assistance payments, employment, minus all deductions, such as RRSP contributions.
Plus tax exempt income received on a reserve or an allowance received as an emergency volunteer
Plus any repayment owed for the child benefit or the RDSP
Minus income from the child benefit or withdrawals from your RDSP
Based on this figure you have your total net adjusted income, and you can calculate your CWB: 26% of every dollar between $3,000 and the first income threshold, then a clawback of 12% of every dollar after until the final income threshold.
Here are the exact income thresholds for your marital situation and province for 2020:
|2020 CWB rates||Single,most provinces||Families, most provinces||Single, Alberta||Families, Alberta||Single, Nunuvut||Families,Nunuvut|
|CWB starts when you earn||$3,000||$3,000||$2,760||$2,760||$6,000||$600|
|Benefit starts 12% clawback after income of||$13,064||17,348||$13,451||18,291||$21,654 (reduced by 4%)||$29,551 (reduced by 8%)|
|Working income where you max out CWB||$8,312||12,150||$9,812||13,312||$16,850||17,643|
|Max allowed income||$24,572||$37,173||$25,793||$36,758||$48,779||$49,926|
Individuals who are eligible for the Disability Tax Credit and CWB may also receive a CWB disability supplement. The maximum amount is $713 in 2020 for each person with a disability.
|Disability Supplement||Supplement starts when you earn (each)||Benefit is reduced by % at income level||Max household income allowed|
|Single, most provinces||$1,150||12% at $24,569||$30,511|
|Families with one working disabled person, most provinces||$1,150||12% at $37,176||$43,118|
|Couple where both spouses are disabled, most provinces||$1,150||6% at $37,176||$49,059|
|Single, Alberta||$910||12% at $25,789||$31,731|
|Families with one working disabled person,Alberta||$910||12% at $36,760||42,702|
|Couple where both spouses are disabled||$910||6% $36,760||48,643|
|Single, Nunuvut||$4,800||12% of $48,785||$54,727|
|Families with one working disabled person,Nunuvut||$4,800||12% of $49,931||55,873|
|Couple where both spouses are disabled||$4,800||6% of $49,931||61,814|
The government provides a calculator for all the benefits it offers and can estimate the amount you may get.
Applying for Canada workers benefit (CWB)
You can fill out Schedule 6 of your tax return or have the CRA will assess you for eligibility automatically.
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