Written for Daily Hive by Christopher Liew, a CFA Charterholder, former financial advisor, and the creator of Wealth Awesome.
Let’s be honest — most of us could use some extra cash, especially during this tough period of high inflation.
Luckily, the Canadian government offers many tax credits, grants, and income assistance programs designed to put some of your hard-earned tax dollars back in your pocket.
If you’re wondering how to get free money from the government, then you’re in the right place.
Are government benefits tax-free?
Few things in life are truly free. So, you should always ask, “What’s the catch?” before accepting anything “free.”
The tradeoff when accepting free money from the government is that you may have to pay taxes on what you receive. While some benefits and aid programs are tax-free payments, others may count toward your total taxable income.
Proven ways to get free money from the government
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Below, I’ll share five programs, benefits, and tax cuts that allow you to take advantage of government money. I’ll also explain who’s eligible and whether or not they’re taxable, so you can see which best fits your situation.
1. Canada Child Benefit
- Taxable: No
- Who’s eligible: Low to moderate-income families with children
The Canada Child Benefit (CCB) is a monthly payment given to parents and guardians with dependent children. The amount you could receive depends on your income and the number of children you have, as well as each child’s age. Younger children garner a high benefit payment than older children.
You may also receive an additional disability supplement for any affected child. You can use this CRA child benefit calculator to see how much you could potentially receive.
2. Canada Education Savings Grant
- Taxable: Yes
- Who’s eligible: RESP account holders with beneficiaries under 17
Registered Education Savings Plans (RESPs) are registered accounts that allow parents and guardians to save money in a tax-advantaged account for their child’s post-secondary education.
When the beneficiary (child) goes to school, they can withdraw the amount to help pay for expenses like tuition, housing, books, and other related education costs.
Contributions made to RESPs may be matched 20% (up to $500 per year) by the government through the Canada Education Savings Grant (CESG) for a lifetime total of $7,200. Lower-income families may be eligible to receive an additional 10-20% on top of this as well.
CESG grants are only issued up until the end of the year the beneficiary turns 17, though. So you should maximize your contributions until then to receive the maximum $7,200 grant amount.
3. Canada Student Grant (for full-time students)
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- Taxable: No
- Who’s eligible: Low to moderate-income full-time students
If you’re a full-time student at a designated school, you could receive up to $6,000 per year ($750 per month) from the Canada Student Grant. If you are still in school full-time, you can qualify for this grant for every year of your undergraduate studies,
The amount you’ll receive depends on your family’s size and income.
4. Canada Workers Benefit
- Taxable: Yes
- Who’s eligible: Lower-income individuals and families
The Canada Workers Benefit (CWB) is a refundable tax credit that you can apply for when filing your annual income tax returns. It has two parts, including a basic amount and a disability supplement.
The maximum basic amount is $1,428 for single individuals earning less than $23,495 per year, and $2,461 for families with a net income less than $26,805. The amount decreases as individuals approach the cutoff income threshold of $33,015 (or $43,212 for families)
The maximum amount you can get from the disability supplement is $737 for both single applicants and families.
If you’re eligible for a tax refund, the CWB could increase your refund and put cash in your pocket. If you’re required to pay taxes, then the CWB could reduce the taxes you owe.
5. GST/HST quarterly tax credit
- Taxable: No
- Who’s eligible: Low to moderate-income families and individuals
Whenever you shop or pay for services, you must pay Goods and Sales Tax (GST). Some provinces charge a separate provincial sales tax in addition to the federal sales tax, while others have combined provincial and federal sales taxes into a single Harmonized Sales Tax (HST).
The GST/HST tax credit is a quarterly rebate that’s issued to eligible families and individuals.
The maximum amount you can receive is $467 if you’re single, $612 if you’re married, and $161 for each child under 19. The amount you’re eligible for depends on your family size and income.
Bonus: open a tax-advantaged registered account
In addition to government grants and tax credits, Canadian residents can open various tax-advantaged accounts to help them save and invest, reduce their taxable income, and avoid capital gains tax that would be applied to standard investments.
Some of the most popular registered accounts include:
- Registered Retirement Savings Plan (RRSP): Contributions are tax-deductible, and withdrawals are subject to standard income taxes
- Tax-Free Savings Account (TFSA): Contributions are not tax-deductible, but profits realized within the account are tax-free
- First Home Savings Account (FHSA): Contributions are tax-deductible, and profits/withdrawals are tax-free when used to purchase or build your first home
Each registered savings plan has its own specific rules regarding eligibility, contribution limits, and how and when funds can be withdrawn.
These accounts allow you to maximize your savings by providing tax-sheltered benefits, allowing you to make the most of your savings or defer taxes until a later date.
Take advantage of every resource you can
From free government benefits to registered savings accounts, Canada offers many programs to provide vital financial assistance and incentivize people to save and invest in their future. If you want to put more money in your pocket and pay less taxes, take advantage of every resource you’re eligible for.
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