Canada Workers Benefit
Notice to the reader
This measure has received Royal Assent.
The Canada Workers Benefit (CWB) is a refundable tax credit that is intended to supplement the earnings of low and modest income workers and improve their work incentives. The credit grows with working income (including employment and self-employment income) over $3,000 and is phased out based on the adjusted family net income of the taxpayer or couple.
For 2021 and later tax years, the budget proposes to enhance the CWB. This enhancement will make the CWB available to taxpayers with a higher adjusted family net income.
The budget also proposes to introduce a “secondary earner exemption” to the CWB. This is a special rule for individuals with an eligible spouse where the spouse or common-law partner with the lower working income excludes up to $14,000 of their working income in the calculation of their adjusted net income, for the purpose of the CWB phase-out.
Note
Currently, Alberta, Quebec and Nunavut have agreements that reconfigure the CWB for their residents. For 2021 and later tax years, the basic CWB and CWB disability supplement may differ for residents of provinces or territories that sign reconfiguration agreements with the federal government to make specific changes to the design of the benefit.
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1. What is the CWB?
The CWB is a refundable tax credit intended to supplement the earnings of low and modest income workers and improve their work incentives.
The CWB has two components – a basic amount, and a disability supplement for those who are eligible for the Disability Tax Credit.
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2. How is the CWB currently being calculated?
The CWB is calculated on Schedule 6 of the T1 Income Tax and Benefit Return.
Currently, for 2021, the basic CWB amount is equal to 26% of working income over $3,000 to a maximum of $1,395* for single individuals without dependants and $2,403* for families (couples and single parents). The benefit is phased out by 12% of adjusted family net income over $13,194* for single individuals without dependants and $17,522* for families.
Individuals who are eligible for the CWB and the disability tax credit may receive a CWB disability supplement up to $720*. The phase-out threshold of the disability supplement is $24,815* for single individuals without dependants and $37,548* for families. The phase-out rate of the supplement is 12%, but is 6% where both individuals in a couple are eligible for the supplement.
*These amounts are indexed to inflation
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3. What are the proposed changes to the calculation of the CWB?
For 2021 and later tax years, the budget proposes that the basic CWB amount be equal to 27% of working income over $3,000 to a maximum of $1,395* for single individuals without dependants and $2,403* for families (couples and single parents). The maximum credit will be phased-out by 15% of adjusted family net income over $22,944* for single individuals without dependants and $26,177* for families.
For 2021 and later tax years, the budget also proposes to enhance the CWB disability supplement. The budget proposes that the maximum amount will be $720* in 2021. It will be phased-out by 15% (7.5% where both individuals in a couple are eligible for the supplement) of adjusted family net income over $32,244* for single individuals without dependants and $42,197* for families.
*These amounts are indexed to inflation after the 2021 tax year.
Note
Currently, Alberta, Quebec and Nunavut have agreements that reconfigure the CWB for their residents. For 2021 and later tax years, the basic CWB and CWB disability amounts may differ for residents of provinces or territories that sign reconfiguration agreements with the federal government to make specific changes to the design of the benefit.
See the chart below highlighting the changes to the calculation of the CWB.
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4. How do the proposed enhancements compare with the current CWB?
See the chart below to see how the proposed enhancements to the CWB compare to the current CWB, for most provinces and territories.
Comparison of the CWB before and after budget proposals CWB 2021 proposed CWB 2021 current Basic benefit Rate 27% of working income over $3,000 26% of working income over $3,000 Maximum benefit for single individuals without dependants $1,395 $1,395 Maximum benefit for families $2,403 $2,403 Phase-out threshold for single individuals without dependants $22,944 $13,194 Phase-out threshold for families $26,177 $17,522 Phase-out rate 15% 12% Disability supplement Maximum disability supplement $720 $720 Phase-out threshold for single individuals without dependants $32,244 $24,815 Phase-out threshold for families $42,197 $37,548 Phase-out rate (one spouse disabled) 15% 12% Phase-out rate (both spouses disabled) 7.5% 6% Note
Currently, Alberta, Quebec and Nunavut have agreements that reconfigure the CWB for their residents. For 2021 and later tax years, the basic CWB and CWB disability amounts may differ for residents of provinces or territories that sign reconfiguration agreements with the federal government to make specific changes to the design of the benefit.
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5. What is the secondary earner exemption?
In addition to the enhancements noted above, the budget also proposes to introduce a secondary earner exemption. This is a special rule for individuals with an eligible spouse where the spouse or common-law partner with the lower working income excludes up to $14,000 of their working income in the calculation of their adjusted net income, for the purpose of the CWB phase-out.
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6. How will the secondary earner exemption help families?
The proposed changes will make the CWB available to more Canadian families.
Consider a taxpayer and their spouse (or common-law partner) who have an adjusted family net income of $50,000. The secondary earner in this couple earned $20,000 of working income. Under the current rules, they would not receive any CWB in 2021. However, with the introduction of the secondary earner exemption, the secondary earner’s adjusted net income will be reduced by the lesser of their working income ($20,000) and $14,000. The adjusted family net income of $36,000 calculated using the proposed changes would give the couple a benefit of $930.
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7. Will my CWB advance payment for 2021 change?
No, your CWB advance payment for 2021 will not change. Any CWB amount you are eligible for but do not receive in advance is paid to you when your 2021 T1 Income Tax and Benefit Return is assessed.
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8. Where can I get more information?
The CRA provides the latest information on the proposed changes on Canada.ca. Check online regularly for updated forms, policies, guidelines, questions and answers, and guidance.
In the meantime, please consult the Finance Canada's Budget 2021 documents for details.
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