Each year, you’ll have to file taxes and pay the amounts you owe. Federal income taxes in Canada are administered by the CRA under the Income Tax Act or ITA for short. The format that is in place reflects a marginal tax rate system where a different tax rate is applicable to each level of income, these are called tax brackets. This makes the taxation system in Canada rather complex, but it’s also fair in the sense that it redistributes wealth. Another complicated aspect of the Canadian tax system is the annual tax rates change.
What Are Tax Brackets In Canada?
Tax brackets in Canada are structured so that low-income earners pay a lower percentage in taxes than those who earn more. The concept is that the more money an individual makes, the more taxes they will pay. Tax brackets are used to apply different rates to varying levels of income. In simple terms, the tax rates are the rates you apply to your income to determine your tax owing.
Why Do Tax Brackets Change?
Personal income tax rates are indexed to inflation using the Consumer Price Index. As a result, tax bracket thresholds will increase with direct correlation to increases in the cost of goods and services in Canada.
How Much Taxes Will I Have To Pay In 2023?
Personal income is taxed following a progressive system, both federally and provincially. The following chart outlines the federal and provincial tax brackets in Canada.
What If You Can’t Pay Your Taxes?
If you’re unable to pay your taxes due to your other debts, there are a few steps you can take:
- Speak To The CRA – You can ask the CRA for a payment plan to pay your taxes. They often have affordable payment arrangements that let you pay your taxes in installments. If you experienced a serious life event, you may even be able to request taxpayer relief, which waives any fees and interest for late tax payments.
- Use A Personal Loan – If the CRA does not offer you a payment plan that best meets your needs, you could opt for a personal loan. A personal loan will allow you to spread the cost of your taxes over a few months to a few years. Moreover, if you have good credit, you may be able to qualify for low rates, which can save you a lot of money. If you’re unsure of what your credit is, check it out for free on Compare Hub. It’s important you check your credit score before applying for a loan as even a 1% difference in interest can have a huge impact in savings.
Federal Tax Brackets And Tax Rates In Canada 2023
| Federal Tax Rate | Federal Income Tax Brackets |
| 15% | Applicable to taxable income up to $53,359 |
| 20.5% | Applicable to taxable income over $53,359 up to $106,717 |
| 26% | Applicable to taxable income over $106,717 up to $165,430 |
| 29% | Applicable to taxable income over $165,430 up to $235,675 |
| 33% | Applicable to taxable income over $235,675 |
Provincial Tax Rates In Canada 2023
Newfoundland And Labrador Income Tax Brackets And Tax Rates
| Newfoundland And Labrador Tax Rate | Newfoundland And Labrador Income Tax Brackets |
| 8.7% | Applicable to taxable income up to $41,457 |
| 14.5% | Applicable to taxable income over $41,457 up to $82,913 |
| 15.8% | Applicable to taxable income over $82,913 up to $148,027 |
| 17.8% | Applicable to taxable income over $148,027 up to $207,239 |
| 19.8% | Applicable to taxable income over $207,239 up to $264,750 |
| 20.8% | Applicable to taxable income over $264,750 up to $529,500 |
| 21.3% | Applicable to taxable income over $529,500 up to $1,059,000 |
| 21.8% | Applicable to taxable income over $1,059,000 |
Prince Edward Island Income Tax Brackets And Tax Rates
| Prince Edward Island Tax Rate | Prince Edward Island Income Tax Brackets |
| 9.8% | Applicable to taxable income up to $31,984 |
| 13.8% | Applicable to taxable income over $31,984 up to $63,969 |
| 16.7% | Applicable to taxable income over $63,969 |
Nova Scotia Income Tax Brackets And Tax Rates
| Nova Scotia Tax Rate | Nova Scotia Income Tax Brackets |
| 8.79% | Applicable to taxable income up to $29,590 |
| 14.95% | Applicable to taxable income over $29,590 up to $59,180 |
| 16.67% | Applicable to taxable income over $59,180 up to $93,000 |
| 17.5% | Applicable to taxable income over $93,000 up to $150,000 |
| 21% | Applicable to taxable income over $150,000 |
New Brunswick Income Tax Brackets And Tax Rates
| New Brunswick Tax Rate | New Brunswick Income Tax Brackets |
| 9.4% | Applicable to taxable income up to $47,715 |
| 14% | Applicable to taxable income over $47,715 up to $95,431 |
| 16% | Applicable to taxable income over $95,431 up to $176,756 |
| 19.5% | Applicable to taxable income over $176,756 |
Quebec Income Tax Brackets And Tax Rates
| Quebec Tax Rate | Quebec Income Tax Brackets |
| 14% | Applicable to taxable income up to $49,275 |
| 19% | Applicable to taxable income over $49,275 up to $98,540 |
| 24% | Applicable to taxable income over $98,540 up to $119,910 |
| 25.75% | Applicable to taxable income over $119,910 |
Ontario Income Tax Brackets And Tax Rates
| Ontario Tax Rate | Ontario Income Tax Brackets |
| 5.05% | Applicable to taxable income up to $49,231 |
| 9.15% | Applicable to taxable income over $49,231 up to $98,463 |
| 11.16% | Applicable to taxable income over $98,463 up to $150,000 |
| 12.16% | Applicable to taxable income over $150,000 up to $220,000 |
| 13.16% | Applicable to taxable income over $220,000 |
Manitoba Income Tax Brackets And Tax Rates
| Manitoba Tax Rate | Manitoba Income Tax Brackets |
| 10.8% | Applicable to taxable income up to $36,842 |
| 12.75% | Applicable to taxable income over $36,842 up to $79,625 |
| 17.4% | Applicable to taxable income over $79,625 |
Saskatchewan Income Tax Brackets And Tax Rates
| Saskatchewan Tax Rate | Saskatchewan Income Tax Brackets |
| 10.5% | Applicable to taxable income up to $49,720 |
| 12.5% | Applicable to taxable income over $49,720 up to $142,058 |
| 14.5% | Applicable to taxable income over $142,058 |
Alberta Income Tax Brackets And Tax Rates
| Alberta Tax Rate | Alberta Income Tax Brackets |
| 10% | Applicable to taxable income up to $142,292 |
| 12% | Applicable to taxable income over $142,292 up to $170,751 |
| 13% | Applicable to taxable income over $170,751 up to $227,668 |
| 14% | Applicable to taxable income over $227,668 up to $341,50 |
| 15% | Applicable to taxable income over $341,502 |
British Columbia Income Tax Brackets And Tax Rates
| British Columbia Tax Rate | British Columbia Income Tax Brackets |
| 5.06% | Applicable to taxable income up to $45,654 |
| 7.7% | Applicable to taxable income over $45,654 up to $91,310 |
| 10.5% | Applicable to taxable income over $91,310 up to $104,835 |
| 12.29% | Applicable to taxable income over $104,835 up to $127,299 |
| 14.7% | Applicable to taxable income over $127,299 up to $172,602 |
| 16.8% | Applicable to taxable income over $172,602 up to $240,716 |
| 20.5% | Applicable to taxable income over $240,716 |
Yukon Income Tax Brackets And Tax Rates
| Yukon Tax Rate | Yukon Income Tax Brackets |
| 6.4% | Applicable to taxable income up to $53,359 |
| 9% | Applicable to taxable income over $53,359 up to $106,717 |
| 10.9% | Applicable to taxable income over $106,717 up to $165,430 |
| 12.8% | Applicable to taxable income over $165,430 up to $500,000 |
| 15% | Applicable to taxable income over $500,000 |
Northwest Territories Income Tax Brackets And Tax Rates
| Northwest Territories Tax Rate | Northwest Territories Income Tax Brackets |
| 5.9% | Applicable to taxable income up to $48,326 |
| 8.6% | Applicable to taxable income over $48,326 up to $96,655 |
| 12.2% | Applicable to taxable income over $96,655 up to $157,139 |
| 14.05% | Applicable to taxable income over $157,139 |
| Nunavut Tax Rate | Nunavut Income Tax Brackets |
| 4% | Applicable to taxable income up to $50,877 |
| 7% | Applicable to taxable income over $50,877 up to $101,754 |
| 9% | Applicable to taxable income over $101,754 up to $165,429 |
| 11.5% | Applicable to taxable income over $165,429 |
Tax Changes In 2022
There are a number of changes individuals need to be aware of for the 2022 tax year:
- Federal tax brackets in Canada will increase by 6.3% based on inflation.
- The basic personal amount (the amount of tax-free annual income) has increased from $14,398 to $15,000 ($602 increase).
- Employment Insurance (EI) premiums are expected to be increased to 1.63%. With Québec at 1.27%
- Canadian Pension Plan (CPP) contribution rate will increase from 5.7% to 5.95% for employees and the maximum pensionable earnings have gone up to $64,900. Québec residents can expect 6.4%.
- The Canada Child Benefit (CCB) has increased from $6,833 to $6,997 per child under age six and $5,765 to $5,903 per child between the ages of six and seventeen.
- RRSP dollar limits for 2023 will now be $30,780 for 2023, up from the previous amount of $29,210 in 2022.
Check out which receipts you should keep for tax purposes.
What Effect Do The Tax Bracket Changes Have On Canadians?
Besides the income taxes you pay, the tax rate and bracket changes can have numerous impacts on various government programs.
Federal Tax Rates
Federal tax brackets in Canada increased by 6.3% to keep up with the Consumer Price Index as reported by Statistics Canada. Tax rates affect how much taxes a person must pay. Tax bracket thresholds increase to keep up with the cost of living. However, the inflation rate is calculated on a federal level and robust cities with greater costs of living may have inflation rates that are higher.
The basic personal amount ensures that no tax is paid on a certain amount of income. This is to protect individuals who are close to or below the poverty line from high taxes.
Tax Rates Based on income
For the million Canadians who earn less than the basic personal income exemption, this is significant as some may not have to pay any taxes at all. For Canadians in the middle-income brackets, however, the effects are not as prominent. Savings may be equivalent to an extra cup of coffee per paycheque. High-income earners may realize little to no benefit from the increase in basic personal income amount.
Pension Plan
The increase in Canadian Pension Plan premiums means that Canadians will see their mandatory deduction for retirement savings increase per paycheque which lowers the increase for those earning less.
EI Premiums
Employment Insurance (EI) premiums are expected to be increased to 1.63%. With Québec at 1.27%. The increase of Employment Insurance premiums along with an increase in maximum insurable earnings, which is indexed to inflation, will have a slight effect on each bi-weekly paycheque.
TFSA Increase
The Tax Free Savings Account (TFSA) new amount will increase from $6,000 to $6,500. The new TFSA limit means that eligible contributors will now have a cumulative contribution room of $88,000.
Your TFSA contributions do not reduce your taxable income. The advantage is that you won’t pay any taxes on your investment income. Withdrawals from your TFSA are not taxed. Nor does it affect your eligibility for certain government programs, which is great if you’re in a lower tax bracket and want to keep your low tax rate.
Old Age Security Pension
Old Age Security pension payments are considered as taxable income. Taxes aren’t automatically deducted each month. You can ask that federal income tax be deducted from your monthly payment by: signing into your My Service Canada Account
Old Age Security (OAS) For those who receive OAS, the new threshold payment for 2023 is $86,912. If you make more than the taxable income, your OAS will be reduced.
Final Thoughts
Overall, the tax changes for the year may seem small, but year after year they can have an impact on your finances. Taking the time to do some research may help you save on taxes and get the maximum refund that you are entitled to or the lowest taxes possible. Tax return software and professional tax specialists can help to expedite the process and make sure you have everything in order.
