For families in Canada living on low incomes, tax time is a great opportunity to reap benefits that can help put money back in pockets.
However, many Canadian low-income households are hesitant to file their taxes as they often believe they'll have to pay the government rather than get money back, despite the latter being most likely.
The best thing every Canadian can do is to ensure they file a return, as those who don't are potentially missing out on money back, much of which has been designed for low-income families in mind.
Here are five ways low-income families can maximize their return.
Determine eligibility for the Working Income Tax Benefit
The Working Income Tax Benefit (WITB) is a refundable tax credit for low-income families. Designed to motivate people with low incomes to remain in the workforce, the WITB can provide a financial boost to families that need it most. The credit amount each individual qualifies for varies slightly by province, family make-up and household income. The Canada Revenue Agency (CRA) has a handy chart that outlines the qualifications.
Take advantage of the Canada Child Benefit
Those with children under 18 may qualify to receive the Canada Child Benefit. This is a tax-free monthly payment for families to help them offset the cost of raising children. The payment varies based on the age of the child and family income, but families with less than $30,450 in annual net income receive the maximum yearly benefits: $6,496 per child under six years old, and $5,481 per child age six through 17.
Don't miss out on GST/HST credits
Low-income Canadians could also benefit from GST/HST credits by filing their taxes. To receive the GST/HST credit, you must be a resident of Canada as defined by the CRA for tax purposes. In addition, you must meet one of three additional criteria: you're at least 19; you're married or have a common-law partner; or you have one or more children with whom you live.
Meeting these eligibility requirements doesn't assure you receive the credit though, as ultimately, your family's income determines payment. Most importantly, to qualify you must file a return for the tax year prior to the credit payout period, even if you have no income. Once a return is filed, the CRA automatically determines whether the applicant is eligible, and pays the credit in quarterly installments. If you apply for the GST/HST credit and your income is too high, the CRA will notify you.
Know if the Canada Caregiver Amount applies
Families that are caring for an infirm relative may be eligible for an additional tax break called the Canada Caregiver Amount (CCA).
The CCA is actually one of the most commonly overlooked tax credits. The credit has been overhauled for the 2017 taxation year. It's no longer possible to claim it for a parent who does not have an impairment in physical or mental functions. However, the income thresholds for dependents who don't live with you have been increased, so you might be able to claim dependents who couldn't claim previously because their income was too high.
Don't forget about Tuition Tax Credits
The CRA lends a helping hand to students with a couple of different tax breaks, the main one being the Tuition Tax Credit (TTC). TTC allows students 16 and older enrolled in post-secondary education to lower their taxable income, or transfer up to $5,000 worth of credits to a spouse or common law partner, parent, or grandparent. The best part? Unused tuition credits can be carried forward until you have the taxable income to claim them.
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At the end of the day, it's always a great idea to get professional advice from a tax expert. They will be able to determine which benefits each family qualifies for, and exactly what materials they need to submit.
Canadians are encouraged to take time to understand how they can take full advantage of the credits and deductions available to them.
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