Section 5 – Employees
Incentives for Workers
Canada Employment Credit – Federal
The Canada Employment Credit is a non-refundable tax credit equal to 15% of the lesser of $1,245 or the employee’s employment income.
Canada Workers Benefit – Federal
Under the Canada Workers Benefit, low-income Canadian workers who are at least 19 years of age are entitled to a refundable tax credit up to 26% of earned income (employment or business income) in excess of a threshold amount, up to an annual limit. Disabled persons are entitled to a supplement. The benefit, which can only be claimed by one spouse, is based on the applicant’s net income in the previous year, family situation and province of residence. An individual may apply for an advance payment of one-half of the benefit to which he/she is entitled for the year24.
24 For additional information and to estimate the amount to which you are entitled, go to the CRA Internet site at: https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/federal-government-budgets/budget-2018-equality-growth-strong-middle-class/canada-workers-benefit.html.
Work Premium – Quebec
The work premium is a refundable credit comparable to the federal Canada Workers Benefit that is granted to Quebec residents who receive work income, i.e. employment or business income, of at least $2,400 for a single person or a head of a single-parent family, or at least $3,600 for a couple, whether or not they have children. The credit is granted to the extent the individual files a tax return for the year and the amount is determined based on the family situation and the individual’s income25. An application for advance payment may be made for part of the premium provided certain conditions are met.
Individuals with a severely limited capacity for employment can benefit from the Adapted Work Premium, which is calculated using more flexible parameters than the Work Premium. Moreover, a supplement is added for long-term recipients giving up last-resort financial assistance during labour market integration. A full-time student can only benefit from the work premium if he/she is the parent of a child with whom her/she resides.
Households subject to a decrease of their work premium due to an increase in their income from work can benefit from some tax relief under to the tax shield (see Section II).
25 The work premium for couple with no children is progressively increased until 2022. The following site provides more information: http://www4.gouv.qc.ca/EN/Portail/Citoyens/Evenements/DevenirParent/Pages/credt_impot_prime_travail.aspx.
Deductions for Workers – Quebec
An employee may deduct an amount equal to 6% of his/her work income, including self-employment income, up to a maximum of $1,19026.
26 For 2020. Indexed annually.
Tax Credit for Career Extension – Quebec
The tax credit for career extension allows individuals aged 60 and over27 to benefit from a non-refundable tax credit of 15% of their work income over $5,000. The credit is calculated on a maximum work income of $10,000 if the individual is aged 60 to 64 and $11,000 if the individual is aged 65 and over. This tax credit can neither be carried over nor transferred to a spouse and is reduced when the work income exceeds $35,20528.
27 If the worker reaches the eligibility age during the year, only the income earned from that time will be eligible for the tax credit. 28 Amount indexed annually.
Tax credit for low-income individuals and families – Ontario
Ontario offers a non-refundable tax credit of 5.05% of an individual’s employment income, up to a maximum credit of $850 per individual ($1,700 per couple). The credit is gradually reduced to nil when the individual’s or the couple’s income reaches $38,500 or $68,500 respectively.
This document is up to date as of September 3, 2020 and reflects the status of legislation, including proposed amendments at this date.