The Low-Income Workers Tax Credit, also known as the Low-Income Individuals and Families (LIFT) Tax Credit, is a valuable financial benefit for Ontario residents. This credit helps reduce or eliminate Ontario personal income tax (excluding the Ontario Health Premium) for eligible low-income workers, including minimum wage earners. Here’s everything you need to know to determine your eligibility, claim the credit, and maximize your savings.
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What is the LIFT Tax Credit?
The LIFT Tax Credit is a non-refundable tax credit designed to provide tax relief to low-income workers in Ontario. While it cannot result in a refund, it can reduce your Ontario personal income tax to zero.
Eligibility Requirements
To qualify for the LIFT Tax Credit, you must meet these criteria:
- Residency:
- Be a Canadian resident in any province or territory at the start of the tax year.
- Be an Ontario resident by the end of the tax year.
- Income and Tax Obligation:
- Have employment income during the year.
- Owe Ontario personal income tax (excluding the Ontario Health Premium).
- Income Thresholds:
- Individual adjusted net income must be below $50,000.
- Adjusted family net income must be below $82,500.
- Other Conditions:
- You must not have spent more than six months in prison during the tax year.
How to Claim the Credit
You can claim the LIFT Tax Credit each year when you file your Personal Income Tax and Benefit Return. Look for the credit listed as the Low-Income Individuals and Families Tax Credit on the tax return.
How is the Credit Calculated?
2022 – onward
You can receive a maximum credit of $875 or 5.05% of your employment income, whichever amount is less.
- Maximum Credit:
- $875 or 5.05% of your employment income, whichever is lower.
- Reduction Thresholds (2022 and Beyond):
The maximum credit is reduced by 5% of the greater of:- Individual adjusted net income over $32,500.
- Adjusted family net income over $65,000.
For example:
- Full Credit: Individuals with adjusted net income under $32,500 or families with net income under $65,000 may qualify for the maximum $875.
- Reduced Credit: Individuals earning between $32,500 and $50,000 or families earning between $65,000 and $82,500 receive a gradually reduced credit.
Real-Life Example
A single person working full-time at minimum wage (earning nearly $30,000) with no additional income would:
- Receive the full $875 credit.
- Pay no Ontario personal income tax.
Individuals earning more than $30,000 may receive a reduced credit based on their income, with no benefit available if earnings exceed $50,000.
LIFT Tax Credit Rates (2019-2021)
- Maximum credit was $850 or 5.05% of employment income, whichever was lower.
- Reduction rates were higher at 10% of the greater of:
- Individual adjusted net income over $30,000.
- Adjusted family net income over $60,000.
Where to Get Help
For questions about the LIFT Tax Credit, contact the Canada Revenue Agency (CRA):
- In Person: Visit a tax services office or tax centre.
- Online: Visit the CRA’s website for more resources.
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Why the LIFT Tax Credit Matters
The Ontario Low-Income Workers Tax Credit offers a significant tax break to low-income individuals and families, helping to ease financial burdens and improve affordability. If you qualify, be sure to claim this credit when filing your taxes to maximize your savings and reduce your tax bill.
Take advantage of this opportunity and keep more of your hard-earned income!
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