Tax Planning For Lower Income Canadians
Most financial advice is geared to middle- and upper-income Canadians. Ironically, the low-income earners most in need of financial advice feel they can’t afford it, while fee-based advisors have little incentive to seek out those with tiny accounts.
Low-income Canadians may be young adults or newcomers starting their careers, the unemployed, entrepreneurs whose business has failed, or retirees who hadn’t saved enough to retire. At any time of life, a setback such as a divorce, accident, layoff, pandemic or a spell of depression or addiction can be financially devastating. If you are not a low-income earner yourself, you probably know someone who is.
Poverty isn’t permanent. Rich folks can lose everything, and poor ones can make fortunes. In most Western countries, however, the children of the wealthy grow up to be wealthy while those from low-income families remain low-income, and the pattern is becoming more pronounced, says a 2023 report on intergenerational income mobility trends in Canada.1
Canadian income thresholds typically follow the federal tax brackets. In 2025, a low-income person has a gross annual income of $57,375 (roughly $48,000 after tax) or less, a middle-income earner grosses between $57,375 and $177,882 ($120,000 after tax), while anyone who grosses above $177,882 is considered a high-income earner, figures from TurboTax show.2
On the expense side, high accommodation costs in Vancouver and Toronto mean low-income earners there will have little left to pay for food, transportation and other essentials. Mid-sized cities such as Ottawa, Calgary and Halifax are more affordable, while small towns or villages have the lowest costs. That’s just a logical assumption; however, the Consumer Price Index (CPI) only measures price changes, and other government cost-of-living statistics are often out of date. The only current, detailed figures on living expenses by region are questionable, as they come from commercial sites used to attract immigrants or real estate investors.
Here are a few tax benefits aimed at low-income earners, and some financial pitfalls they should definitely avoid.
Free Resources
The Canadian Foundation for Financial Planning is a registered charity that links volunteer financial planners willing to offer free counselling to those requesting it, either virtually or in-person. The foundation offers free group sessions to help those new to Canada, explaining how Canadian financial institutions work, how to safely access credit and how to avoid scams.
The registered non-profit Credit Counselling Society offers free advice to help with debt consolidation, budgeting, dealing with creditors and improving credit. The Society, launched in New Westminster, British Columbia in 1996, now has offices in British Columbia, Alberta, Saskatchewan, Manitoba, and Ontario.
Government Benefits
There are an assortment of government programs designed to help low-income earners. Who qualifies for which program, and how much they get is usually determined by their most recent tax return. However, a Statistics Canada study released in May 20253 found that about 20% of men and 10% of women under 65 who received social assistance had not filed returns, making them ineligible for many benefits. Filing tax returns is, therefore, an important first step in accessing benefits. Low-income earners don’t need to hire accountants or buy software to file their taxes and can instead access the Community Volunteer Income Tax Program or similar volunteer programs.
Those seeking financial help can use the federal Benefits Finder Tool4 that allows users to confidentially key in answers to 13 questions, such as their age, family status, employment, and income, then uses the information to recommend specific benefits and programs for which they may be eligible.
Housing Assistance
Finding affordable accommodation in Canada was probably easier for your parents or grandparents than it is for you or your children. Today’s landlords not only charge high rents but also require would-be tenants to have solid credit records and good jobs. As a result, your kids may be living with you—or you may be living with them—out of financial necessity. The homeless are just people who don’t have anyone to help them.
Most rent relief programs are municipally based, and tenants seeking help in paying their rent should contact the service manager (SM) in their local government and ask them to forward the necessary paperwork, since direct applications are rarely allowed. Housing assistance programs often assume applicants are living in, or waiting to live in, some form of rent-geared-to-income, non-profit or co-operative accommodation, and are collecting welfare. Tenants in regular, for-profit apartment buildings likely won’t get any government assistance in paying their rent.
Canadian Dental Care Plan (CDCP)
This plan offers dental insurance for low-income earners and their families. Eligible recipients must have a family net income of less than $90,000 and have no access to private dental insurance, either through their employer, a pension plan, or through purchased plans. The plan covers dental examinations, x-rays, fillings, cleanings, emergencies and some specialized services. The application process is handled through the My Service Canada Account portal, which you can register for online through participating banks, or via a government-issued credential called a GCKey.5
Canada Workers Benefit (CWB)
This is a refundable tax credit, paid out three times a year in mid-January, July and October, for those who work in low-paying jobs. In most provinces after the 2025 increase, individuals can get as much as $1,633 ($544 every four months) if their net working income is $26,855 or less, with benefits reduced to nothing at $37,474. Families with children can get $2,813 ($938 every four months) if their adjusted family net income is $30,639 or less, down to zero at $49,391. The income thresholds are different in Quebec, Alberta and Nunavut.
Those eligible for the disability tax credit and have their certificate filed with the CRA may be eligible for an additional supplemental amount of as much as $843, if their adjusted net income is below certain thresholds. Quebec and Nunavut have different maximums.6
GST/HST Credit
Filing a tax return is essential to get this credit, which offers quarterly payments to offset sales tax paid. As of 2025, individuals earning less than $52,255 a year can get a maximum of $533 a year ($133.25 per quarter), while couples earning $69,015 a year or less can get up to $698 and $184 for each child under 19.7
Canada Child Benefit (CCB)
This benefit, sometimes still referred to as the “baby bonus,” started in 1945 when it was paid out to all families with children under 16. Today’s version is a tax-free monthly payment distributed to parents who are living with, and primarily responsible for, the care of children 17 and under. Recipients must have reported a 2024 adjusted net income of $37,487 or less, with benefits gradually reduced for those earning more. The benefit may be supplemented with additional provincial benefits.8
Guaranteed Income Supplement (GIS)
The Guaranteed Income Supplement (GIS) is a monthly, tax-free supplement of up to about $1,100 paid out to those 65 and older who already receive the Old Age Security (OAS) benefit. The amount paid depends on whether the recipient is single, or part of a couple. Single recipients must have an annual income of less than about $22,440, couples who already get full OAS cannot have a combined income of more than $29,616, or $41,472 if their spouse is aged 60 to 64 and already gets an allowance because their partner receives the GIS. If the recipient’s spouse gets neither OAS nor an allowance, their total income must be below $53,808. Those receiving the GIS may earn up to $5,000 from working before the GIS is reduced at a rate of 50 cents on the dollar, down to zero if the recipient earns $15,000.9
Things To Avoid Smoking
Smoking prevalence is stratified by income in Canada, with those least likely to be able to afford cigarettes the most likely to smoke. Those in the bottom 20% of income earners are 1.8 times as likely to smoke as those in the top 20%, figures from Statistics Canada show.10
As of 1 April 2025, the average cost of a pack of 20 cigarettes ranged from a low of $15.36 in Quebec to $19.75 in Newfoundland, figures from Physicians for a Smoke-Free Canada show.
The wholesale cost and retail markup account for about $7 of the cost of a pack of 20, with federal excise duty, provincial tobacco tax and HST representing the remainder of between half and two-thirds the cost of a retail pack, depending on the province. Online outlets offer discounts for smokers who order cartons from their sites. Regardless of how they are purchased, someone who smokes 20 cigarettes a day literally burns through about $600 a month or $7,200 a year on their habit.
Lottery Tickets
As you might expect, lower income earners spend a disproportionately large amount of their money on lottery tickets. A 2020 report from McGill University confirms that the lower the income, the greater the proportion of lottery ticket purchases per resident11. The odds of winning Lotto 6/49’s Classic Jackpot are approximately 1 in 14 million, similar to the odds of putting the name of everyone in Ontario in a gigantic hat and randomly pulling out your own, says PlaySmart, a site created by the Ontario Lottery and Gaming Corporation (OLG).
Payday Loans
Payday loans are the 21st century version of loan sharks, without the physical violence associated with gangsters. Of course, lower income households are most likely to resort to these places to help them buy groceries and pay the rent, says a report from the Financial Consumer Agency of Canada.
The nature of the business can be garnered from the name of a new federal act that was passed into law on 1 January 2025: Criminal Interest Rate Regulations (SOR /2024-114). These lenders are now allowed to charge a maximum of $14 in interest every two weeks for every $100 borrowed, equating to an annual percentage rate (APR) of up to 390% per year. The legislation acknowledged that if the rate cap was set too low, it would “push some borrowers toward unregulated lenders.” As an alternative to payday loans, low-income borrowers should instead seek small loans from credit unions or on sites such as Bree, Nymble and goPeer.
Richard Morrison, CIM, is a former editor and investment columnist at the Financial Post. richarddmorrison@yahoo.ca
1 https://onlinelibrary.wiley.com/doi/10.1111/caje.12699
2 https://turbotax.intuit.ca/tips/what-the-middle-class-tax-cut-means-for-canadians
3 https://www150.statcan.gc.ca/n1/pub/75f0002m/75f0002m2025005-eng.htm
4 canada.ca/en/services/benefits/finder/tool
5 https://www.canada.ca/en/services/benefits/dental/dental-care-plan.html
6 canada.ca/en/revenue-agency/services/child-family-benefits/canada-workers-benefit
7 canada.ca/en/revenue-agency/services/forms-publications/publications/rc4210/gst-hst-credit.html#toc11
8 canada.ca/en/revenue-agency/services/child-family-benefits/canada-child-benefit-overview.html
9 https://www.canada.ca/en/services/benefits/publicpensions/old-age-security/guaranteed-income-supplement.html
10 https://www150.statcan.gc.ca/n1/daily-quotidien/250305/cg-a003-eng.htm
11 https://otto.lab.mcgill.ca/papers/fu_et_al_in_press.pdf