IMPACT OF CWB and CPP CONTRIBUTIONS

Canada Workers Benefit:

For a single person for the 2025 tax year, you are entitled to a CWB of 27% x your working income over $3,000, to a maximum of $1,633. The maximum CWB is reached once working income reaches $9,048. However the benefit is reduced by 15% of the amount by which your net income exceeds $26,855. The calculation is different for individuals with a spouse or a disability certificate.

Canada Pension Plan Contributions:

CPP contributions are required on net self-employment income between $3,500 and $71,300. The rate is 11.9%.^[1]

Impact on refund:

For a person whose only taxable income is from self-employment, the CWB will increase as income increases from $3,000 to $9,048 and then it will remain at this maximum until income starts to rise above $26,855.

At the same time, CPP contributions will steadily increase as self-employment income rises above $3,500.

Since the CWB rises at a higher rate (27% of income) than CPP contributions (11.9%), the individual’s tax refund steadily grows between an income range of $3,000 and $9,048. As income exceeds $9,048 the tax refund will start to reduce because the CWB remains at its maximum while CPP contributions continue to rise.

Here is a graph showing the refund amount for incomes between $5,000 and $15,000 for 2025:

If, for example, the individual had ODSP income of $10,000 in addition to self-employment income, the above table would not change since ODSP is not taxable income, and the net income would not reach the threshold at which the CWB starts to reduce (ie $26,855).^[2]

In general, for low income individuals, the net self-employment income amount that will result in the highest refund will be the income at which the CWB first reaches its maximum. For 2026 that amount is $9,167.

Why this matters:

For individuals with low self-employment income, the interaction between the CWB and CPP can produce a counterintuitive result: claiming additional business expenses can reduce, rather than increase, the individual's tax refund.

For example, suppose an individual has gross self-employment income of $9,000 and has incurred business expenses that have not yet been tallied and entered on the tax return. The individual might instinctively expect that claiming those expenses will reduce income and therefore increase their tax refund. At this income level, however, the opposite generally occurs. As expenses reduce net self-employment income, the individual's CWB falls at a rate of 27%, while CPP contributions fall at a rate of only 11.9%. The net result is that claiming additional expenses generally reduces the refund.

This unusual result applies only over a relatively low range of income. Once working income exceeds approximately $9,048, the CWB has reached its maximum and additional income no longer increases the benefit. The normal incentive to claim deductible expenses therefore begins to reassert itself.

Of course, individuals are required to report their net self-employment income and therefore should claim all actual deductible expenses. However, they should be aware that, at these low income levels, overstating an expense—for example, by overestimating the percentage of their home used for business—may actually reduce their refund rather than increase it.