The New Brunswick Low Income Tax Reduction (LIR) is an income tax credit that helps low-income individuals and families in the province.
In general, it allows qualifying individuals to subtract 15% of their net income from their total income when calculating their income taxes.
What this means for you is that you can earn a little less before your taxes increase. As a result, you will end up with more money to spend on necessities or save for the future. These are important benefits for those who are struggling to pay bills and put food on the table every month.
New Brunswick Low Income Tax Reduction Example
For example, you have a total taxable income of $30,000. You have a net income of $20,000. Normally, you would calculate your taxes on the full $30,000 before making any deduction (learn more about the New Brunswick tax rate).
However, based on the credit and with reference to the New Brunswick Low Income Tax Reduction (LIR) Schedule 1 below, you will be allowed to subtract 15% of $20,000 which is $3,000 from your taxable income which makes it now $27,000 ($30,000 – $3,000).
The result is that your total tax due will be reduced from roughly 15% x $30,000 = $4,500 [$30k x 0.85 x 0.15 = 4500].
This is a substantial savings for those who are living on low incomes. In fact, we are talking about an approximate 25% reduction in the tax bill! So, you will have more money to spend or save, leading to a better quality of life. This is especially true when it comes to food and other necessities such as utilities and heating.
Furthermore, the LIR helps alleviate other financial stressors that can occur in low-income circumstances such as medical expenses or high phone bills resulting from a lack of access to credit or bank accounts.
Low Income Tax Reduction
The Low Income Tax Reduction (LIR) is intended to help low-income individuals and families.
You are considered low income if your family’s net income is $24,000 or less annually, before taxes.
If you fall under this category, the New Brunswick Low Income Tax Reduction (LIR) Schedule 1 applies to you. For purposes of the LIR, net income refers to your total income minus any deductions or other adjustments required by law.
You must also be a resident of New Brunswick on December 31st of each tax year and make a declaration of your income for the previous year before April 30th of each year in order for the credit to apply.
Consider taking advantage of an accountant in New Brunswick to help you navigate through everything.