Low Income in Canada: What It Means and How It Is Measured

Low income in Canada does not have one universal dollar limit that applies to every person, household, benefit and government program.

Statistics Canada uses several measures to study low income and poverty, while federal, provincial and territorial programs establish their own income thresholds for determining eligibility. The applicable amount may depend on household size, family income, location, age, disability status, marital status and the particular benefit being requested.

What Is Considered Low Income in Canada?

A person or family may be described as having a low income when the financial resources available to the household fall below a specified threshold.

However, the result depends on:

• The low-income measure being used.
• Whether income is measured before or after tax.
• The number of people in the household.
• Whether the people are related and share expenses.
• The province, territory or community where they live.
• The cost of essential goods and services in that location.
• Which types of income, taxes and government transfers are included.
• The particular benefit, credit or program being considered.

For this reason, there is no single annual salary that automatically makes every Canadian a low-income individual.

Canada’s Main Low-Income Measures

What Is the Market Basket Measure?

The Market Basket Measure, commonly called the MBM, is Canada’s official measure of poverty.

It estimates the cost of a basket of goods and services representing a modest, basic standard of living. The basket includes categories such as:

• Food.
• Clothing and footwear.
• Shelter.
• Transportation.
• Other essential household expenses.

A family is considered to be living below the official poverty line when its disposable income is lower than the applicable MBM threshold for its family size and region.

The MBM is regional because the cost of meeting basic needs is not identical throughout Canada. Housing, transportation and other expenses can vary significantly between large metropolitan areas, smaller communities, rural regions and the territories.

What Does Disposable Income Mean Under the MBM?

Disposable income under the Market Basket Measure is not simply the salary shown on an employment contract or the total income entered at the top of a tax return.

The calculation begins with income and makes adjustments for amounts such as:

• Income taxes.
• Canada Pension Plan or Quebec Pension Plan contributions.
• Employment Insurance contributions.
• Union dues.
• Certain medical expenses.
• Child care expenses.
• Support payments.
• Other non-discretionary expenses recognized by the methodology.
• Government transfers included in income.

The purpose is to estimate the resources a family has available to purchase the goods and services included in the MBM basket.

Why the MBM Threshold Changes by Location

Canada does not have one national cost of living. A household’s necessary expenses depend partly on where it lives.

Regional differences can include:

• Rent and other shelter costs.
• Public transportation availability.
• The cost of operating a vehicle.
• Food prices.
• Home-heating requirements.
• Access to essential services.
• The additional costs of living in remote or northern communities.

The MBM therefore uses different regions instead of applying one identical dollar threshold throughout the country.

How Household Size Affects the Poverty Threshold

A larger household normally requires more income than a person living alone. However, household costs do not always increase at the same rate for every additional member because families can share housing, transportation, utilities and other expenses.

Statistics Canada adjusts the reference threshold using an equivalence scale. This allows the amount for a reference family to be converted for households of different sizes.

A family should use the threshold corresponding to its size and region rather than comparing its income with an amount published for a different household.

What Is the Low Income Measure?

The Low Income Measure, or LIM, is a relative measure of low income.

Under the after-tax LIM, a household is considered to have a low income when its adjusted after-tax income is below 50% of the median adjusted household income.

The median is the middle of the income distribution. Half of households have an income above the median and half have an income below it.

Unlike the Market Basket Measure, the LIM is not directly based on the cost of a particular basket of goods and services. It measures how a household’s income compares with the income of other households in Canada.

How the LIM Adjusts for Household Size

A household of four cannot reasonably be compared directly with a person living alone without adjusting for the number of people supported by the income.

The LIM calculation therefore adjusts household income using an equivalence scale. This reflects the fact that household members can share certain expenses.

The result is an adjusted household income that can be compared with the national median. If that amount falls below the applicable LIM threshold, household members are classified as having a low income under that measure.

What Are the Low Income Cut-Offs?

Low Income Cut-Offs, commonly called LICOs, are thresholds below which a family is expected to spend a substantially larger share of its income than the average family on necessities.

The necessities considered include:

• Food.
• Shelter.
• Clothing.

LICOs vary according to:

• Family size.
• Community size.
• Whether income is measured before or after tax.

LICOs remain available for statistical and historical purposes, but they are not Canada’s official poverty line.

MBM vs LIM vs LICO

A household can fall below one measure but not another because each measure answers a different question.

Is Low Income the Same as Poverty?

The terms are related but are not always interchangeable.

Under Canada’s official statistical framework, a person is considered to be living in poverty when their family’s disposable income falls below the applicable Market Basket Measure threshold.

“Low income” is a broader expression. It may refer to:

• A result under the MBM.
• A result under the LIM.
• A result under a LICO.
• An income below a benefit’s eligibility threshold.
• A household experiencing financial hardship even if it is slightly above a statistical threshold.

Being above the official poverty line does not necessarily mean a family is financially comfortable. A household may still struggle with high rent, debt, disability-related expenses, child care or unexpected costs.

Is There One Low-Income Salary in Canada?

No. A salary alone cannot establish low-income status in every situation.

For example, two people with the same employment income may receive different results because:

• One lives alone and the other supports children.
• They live in regions with different MBM thresholds.
• One has a spouse or common-law partner with income.
• One receives government benefits or other income.
• They have different taxes and recognized non-discretionary expenses.
• A benefit uses adjusted family net income instead of individual income.

Gross salary, net income, taxable income, adjusted family net income and MBM disposable income are different concepts.

Income Terms Commonly Used by Government Programs

The exact definition must always be checked in the rules of the program being considered.

What Is Adjusted Family Net Income?

The Canada Revenue Agency uses adjusted family net income, commonly abbreviated as AFNI, to calculate several benefits and credits.

When an applicant has a spouse or common-law partner, their applicable net incomes are generally combined. Certain amounts are then subtracted or added back according to the program’s formula.

AFNI can affect payments such as:

• The Canada Child Benefit.
• The Canada Groceries and Essentials Benefit.
• The Canada Workers Benefit.
• The Canada Disability Benefit.
• The child disability benefit.
• Related provincial or territorial benefits administered by the CRA.

Each program can apply different thresholds, exemptions and reduction rates even when both use the expression “adjusted family net income.”

Does Low Income Depend on Individual or Family Income?

It depends on the program and measurement system.

Some programs examine individual income. Others consider:

• The combined income of spouses or common-law partners.
• Adjusted family net income.
• The income of an economic family.
• Total household income.
• The income of parents when assessing a dependent student.
• Current monthly income for emergency or social assistance.

A person with little or no personal income may not qualify for an income-tested benefit if their spouse or common-law partner has sufficient income.

Conversely, a working person may still qualify when the program considers family size, children, disability status or permitted working-income exemptions.

Do Government Benefits Use the Official Poverty Line?

Not necessarily.

The MBM is used to measure poverty in Canada, but government programs usually establish their own eligibility rules.

A program may use:

• A fixed net-income threshold.
• Adjusted family net income.
• Taxable income.
• Monthly household income.
• A sliding reduction formula.
• Income plus an asset test.
• A threshold based on family composition.
• A percentage of local median income.

Being below the MBM poverty line does not automatically enrol a person in every low-income benefit. Being above it also does not automatically prevent eligibility for all benefits.

Common Federal Support for People With Lower Incomes

This is not a complete list. Eligibility must be confirmed separately for every program.

Provincial and Territorial Low-Income Assistance

Provinces and territories administer additional programs that may include:

• Income or social assistance.
• Disability assistance.
• Rent supplements.
• Subsidized housing.
• Child benefits.
• Prescription-drug coverage.
• Dental and vision programs.
• Electricity and heating assistance.
• Public transit discounts.
• Property-tax support.
• Sales-tax credits.
• Emergency financial assistance.
• Child care subsidies.
• Legal aid.

Rules vary significantly. Some provincial programs consider both income and assets, including savings, investments, property and vehicles.

Can Someone Work and Still Be Considered Low Income?

Yes. Employment does not automatically place a person above a low-income threshold.

A working household may still have a low income because of:

• Low hourly wages.
• Part-time or irregular working hours.
• Seasonal employment.
• Temporary job loss.
• A large number of dependants.
• High essential living costs.
• Disability-related limitations or expenses.
• Single-parent household responsibilities.

Some programs are specifically designed for lower-income workers. The Canada Workers Benefit is one example of refundable tax support tied to employment income and family circumstances.

Can Seniors Be Considered Low Income?

Yes. A senior’s income may include OAS, CPP or QPP, workplace pensions, retirement savings withdrawals, investment income and employment income.

Lower-income seniors may qualify for assistance such as:

• The Guaranteed Income Supplement.
• The Allowance.
• The Allowance for the Survivor.
• Provincial or territorial senior benefits.
• Rent and property-tax assistance.
• Prescription-drug coverage.
• Dental and vision programs.
• Energy or utility assistance.

GIS uses income and marital status rather than simply applying the national MBM threshold.

Can Students Be Considered Low Income?

Students may have little personal income, but benefit and financial-aid programs can consider additional information.

Depending on the program, the calculation may include:

• The student’s income.
• A spouse or common-law partner’s income.
• Parental income.
• Family size.
• The number of dependants.
• Tuition and education costs.
• Province or territory of residence.
• Disability status.

Having low employment income does not automatically make a student eligible for every low-income program.

How Disability Can Affect Low-Income Eligibility

People with disabilities may experience additional costs involving healthcare, transportation, equipment, personal support or accessible housing.

Disability-related programs may consider:

• Individual or family income.
• Age.
• Medical eligibility.
• Disability Tax Credit approval.
• CPP contribution history.
• Ability to work.
• Assets and savings.
• Province or territory of residence.

Approval for one disability program does not guarantee approval for another because their medical and financial criteria can differ.

Does Receiving Benefits Count as Income?

It depends on the benefit and the calculation being performed.

Government payments may be:

• Taxable and included in net income.
• Tax-free and excluded from taxable income.
• Reported on the tax return but offset by a deduction.
• Excluded when a particular benefit calculates income.
• Included for one provincial program but excluded for another.

Tax treatment and benefit eligibility are separate questions. A tax-free payment could still be considered under the rules of another assistance program.

Why Filing a Tax Return Matters

Many federal, provincial and territorial benefits rely on information from the annual income tax return.

A person should generally file a return even when they:

• Had no employment income.
• Owe no income tax.
• Had income below the basic personal amount.
• Received social assistance.
• Were a student.
• Received only pension income.

Filing allows the CRA to calculate or maintain eligibility for applicable benefits and refundable credits.

When a person has a spouse or common-law partner, both normally need to file annual returns so the CRA can calculate family-income-based payments correctly.

Which Tax Year Is Used for Benefits?

Many CRA-administered benefits use income from the previous tax year.

For example, benefits paid during a July-to-June benefit period are often calculated using the tax return for the preceding calendar year.

This can mean that:

• A recent income reduction is not immediately reflected.
• A previous year of higher income can reduce current payments.
• A previous year of lower income can increase current payments.
• Payments can change when a new benefit year begins.

Some programs allow current-income estimates or special adjustments, but this must be confirmed under the individual program’s rules.

How Marital Status Affects Low-Income Benefits

Many benefits use combined family income. Marriage, separation, divorce, reconciliation or the death of a spouse can therefore change eligibility and payment amounts.

The CRA should generally be informed when marital status changes. A recognized separation normally requires the couple to live apart for at least 90 consecutive days because of a relationship breakdown.

Once the separation is recognized, applicable benefits may be recalculated using the new family situation.

Do Savings and Assets Affect Low-Income Benefits?

Some programs consider only income, while others also have asset limits.

Assets that may be reviewed can include:

• Money in bank accounts.
• Investments.
• Additional real estate.
• Vehicles.
• Registered and non-registered savings.
• Business assets.
• Money received from an inheritance or settlement.

CRA-administered tax credits commonly focus on income rather than imposing a general asset test. Provincial social-assistance programs are more likely to examine both income and assets.

Exemptions may apply to a principal residence, necessary vehicle, disability trust, registered disability savings plan or other protected asset.

Does Debt Reduce Income for Benefit Purposes?

Personal debt does not usually reduce the income reported on a tax return or automatically increase eligibility for benefits.

Expenses such as the following generally do not reduce adjusted family net income merely because they are difficult to afford:

• Credit-card payments.
• Personal loans.
• Mortgage principal.
• Car-loan payments.
• Consumer debt.

Certain deductible expenses can reduce net income, and the MBM methodology recognizes selected non-discretionary expenses. The treatment depends on the calculation being performed.

What If Income Suddenly Drops?

A sudden reduction in income may occur because of job loss, illness, disability, separation, reduced hours or the death of a family member.

Possible actions include:

1. Applying for Employment Insurance when eligible.
2. Checking provincial or territorial emergency assistance.
3. Reviewing rent, utility and food-support programs.
4. Updating marital status and family information with the CRA.
5. Filing any outstanding tax returns.
6. Checking whether the applicable program accepts a current-income estimate.
7. Using the official Benefits Finder.
8. Contacting creditors or service providers before payments are missed.

An income reduction does not automatically update every benefit. Some programs continue using the previous tax year until the next recalculation.

What Documents May Be Needed?

Applications for income-tested assistance may request:

• A notice of assessment.
• Income tax returns.
• Recent pay statements.
• Employment records.
• Bank statements.
• Pension statements.
• Proof of rent or housing costs.
• Utility bills.
• Immigration or residency documents.
• Identification documents.
• Information about a spouse or common-law partner.
• Medical or disability certification.
• Information about savings and other assets.

Applicants should use the official checklist for the specific program rather than sending sensitive documents to an unofficial website.

How to Determine Whether You Have a Low Income

1. Identify why the calculation is needed.
2. Determine whether the question involves the MBM, LIM, LICO or a benefit-specific threshold.
3. Confirm which income year is used.
4. Identify the correct household or family size.
5. Check whether a spouse or common-law partner’s income is included.
6. Use the correct province, territory and region.
7. Confirm whether the program uses gross, net, taxable or adjusted family net income.
8. Review any working-income or disability exemptions.
9. Check whether assets are considered.
10. Compare the information with the current official threshold.

A general online poverty threshold should not be used as a substitute for a program’s official eligibility calculation.

How to Find Low-Income Benefits

A person looking for assistance can:

• Use the Government of Canada Benefits Finder.
• Check the CRA’s benefits and credits pages.
• Review provincial or territorial benefit directories.
• Contact the local housing authority.
• Check municipal utility and transit programs.
• Use a free tax clinic when eligible.
• Review disability, senior, family and student programs separately.
• Confirm whether applications are automatic or require a form.

Common Low-Income Misunderstandings

• Believing Canada has one low-income salary for everyone.
• Using an MBM threshold for the wrong region or family size.
• Confusing gross salary with disposable income.
• Assuming the official poverty line is used by every benefit.
• Ignoring a spouse or common-law partner’s income.
• Assuming no tax return is needed when no tax is owed.
• Using an outdated threshold from a previous year.
• Confusing low income with taxable income.
• Assuming every benefit is automatically paid.
• Believing all government payments are tax-free.
• Ignoring provincial, territorial and municipal assistance.
• Assuming debt payments reduce income for every program.
• Failing to report a marital-status change.
• Comparing an individual income with a household threshold.
• Providing personal documents through an unofficial website.

Low Income in Canada Checklist

• Canada’s official poverty line uses the Market Basket Measure.
• The MBM is based on the cost of a modest basket of essential goods and services.
• MBM thresholds vary by family size and region.
• The LIM compares adjusted household income with the national median.
• LICOs examine the share of income likely needed for necessities.
• The three measures can produce different results.
• No single salary defines low income for every Canadian.
• Government programs may use their own income thresholds.
• Many benefits use adjusted family net income.
• A spouse or common-law partner’s income may be included.
• Some programs examine assets as well as income.
• Filing annual tax returns helps maintain benefit eligibility.
• Federal and provincial programs must be checked separately.
• Current official thresholds should always be used.

Related Low-Income and Benefits Guides

Frequently Asked Questions

Northbly is an independent informational website and is not affiliated with Statistics Canada, the Government of Canada, the Canada Revenue Agency, Service Canada or any provincial, territorial or municipal government. Poverty thresholds, low-income measures, benefit amounts, income limits, tax rules and eligibility requirements may change. Always verify current information through official government sources before applying or making financial decisions.