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Low Income Cut-Off: What You Need To Know

Low Income Cut-Off: What You Need To Know. There are various things to note about the low income cut-off which are as below.,

The Low Income cut-offs is the income level at which a family may be in poverty stricken circumstances. This happens because it has to spend more of its income on necessities than the average family size. the family has to spend 20% of his income on food, shelter etc more than the average family.

The first step to be taken in the calculation of a low income cut-off is to calculate the average amount a family spends on food, clothing and shelter. As at 1992, the survey was that an average family spends 43% of their after tax income and 35% of their total tax income on necessities. Another thing is to look at the income by expenditure distribution and determine the level of income a family spends on the necessities of food, shelter and clothing

Low Income Rate and low income gap

In other to determine if a family is on lo is w income, the LICO will be compared to the income of the persons economic family but if the persons economic family is below the cut-off, then the family is considered to be in low income. Persons I low income are however part of low-income families and children in low income are children of low-income families. therefore, the low-income rate is calculated as the number of persons divided by the total population.

The low-income gap is the amount that the person family income falls. It is based on the family size and community size where the family lives. for instance, a family with an income of $20,000 and an income cut-off of $25,000 will have a low-income gap of $5,000. Negative income is treated as zero for the calculation of low-income gap.

Use of after-tax and before-tax LICOs

The Statistic Canada uses two sets of income which are based on before tax income and after tax income. These income taxes are done independently but the statistics Canada prefers to use the after tax LICOs.

Low Income Measures (LIMs)

The Low income measures is commonly used for international comparisons. Low Income Measures are applied using a single income survey. It is a fixed percentage of median adjusted household income taken household needs into account. The Low income measures are calculated using the before tax, after tax and market income. They are calculated using annual survey of household income. LIMs depends on SLID samples.

Requirements For Low Income Cut-Off 2018

Size of Family Unit Minimum necessary income
1 person (the sponsor) $24,949
2 persons $31,061
3 persons $38,185
4 persons $46,362
5 persons $52,583
6 persons $59,304
7 persons $66,027
More than 7 persons, for each additional person, add $6,723
Size of Family Unit Minimum necessary income
1 person(child or grandchild) $24,949
2 persons $31,061
3 persons $38,185
4 persons $46,362
5 persons $52,583
6 persons $59,304
7 persons $66,027