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 changes. Let’s take a look at the changes that will occur in 2022.
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.
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.
There are a number of changes individuals need to be aware of for the 2022 tax year:
Check out which receipts you should keep for tax purposes.
Federal tax brackets in Canada increased by 1.0% to keep up with the Consumer Price Index as reported by Statistics Canada. This affects how much taxes Canadians have to pay as each of the tax bracket thresholds have increased 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 same goes for the Canada Child Benefit which increases in line with inflation. For some households, the increase in tax bracket thresholds and government benefits may not keep up with their budgets.
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 absurd taxes.
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.
A slight reduction of Employment Insurance premiums along with an increase in maximum insurable earnings, which is indexed to inflation, will have very minimal effects on each bi-weekly paycheque, less than a dollar. 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.
How to avoid the capital gains tax? Find out here.
Personal income is taxed following a progressive system, both federally and provincially. The following charts outline the federal and provincial tax brackets in Canada for 2022.
| Federal Tax Rate | Income Level |
| 15% | On income $50,197 and below. |
| 20.5% | On the next portion of income between $50,197 to $100,392 |
| 26% | On the next portion of income between $100,392 to $155,625 |
| 29% | On the next portion of income between $155,625 to $221,708 |
| 33% | On the next portion of income after $221,708 |
Find out if your and your family are eligible for the GST/HST tax credit this year.
| Province/Territory | Tax Rate and Description |
| Newfoundland and Labrador | – 8.7% applicable to the first $39,147 of taxable income – 14.5% applicable to the next $78,294 of taxable income – 15.8% applicable to the next $139,780 of taxable income – 17.8% applicable to the next $195,693 of taxable income – 19.8% applicable to taxable income amounts over $250,000 |
| Prince Edward Island | – 9.8% applicable to the first $31,984 of taxable income – 13.8% applicable to the next $31,985 of taxable income – 16.7% applicable to taxable income amounts over $63,969 |
| Nova Scotia | – 8.79% applicable to the first $29,590 of taxable income – 14.95% applicable to the next $29,590 of taxable income – 16.67% applicable to the next $33,820 of taxable income – 17.5% applicable to the next $57,000 of taxable income – 21% applicable to taxable income amounts over $150,000 |
| New Brunswick | – 9.40% applicable to the first $43,835 of taxable income – 14.82% applicable to the next $89,775 of taxable income – 16.52% applicable to the next $145,955 of taxable income – 17.84% applicable to the next $166,280 of taxable income – 20.30% applicable to taxable income amounts over $166,280 |
| Quebec | – 15% applicable to the first $46,295 of taxable income – 20% applicable to taxable income from over $46,295 to $92,580 – 24% applicable to taxable income from over $92,580 to $112,655 – 25.75% applicable to taxable income amounts over $112,655 |
| Ontario | – 5.05% applicable to the first $46,226 of taxable income – 9.15% applicable to the next $92,454 of taxable income – 11.16% applicable to the next $150,000 of taxable income – 12.16% applicable to the next $220,000 of taxable income – 13.16% applicable to taxable income amounts over $220,000 |
| Manitoba | – 10.8% applicable to the first $34,431 of taxable income – 12.75% applicable to the next $74,416 of taxable income – 17.4% applicable to taxable income amounts over $74,416 |
| Saskatchewan | – 10.5% applicable to the first $46,773 of taxable income – 12.5% applicable to the next $133,638 of taxable income – 14.5% applicable to taxable income amounts over $133,638 |
| Alberta | – 10% applicable to the first $131,220 of taxable income – 12% applicable to the next $26,244 of taxable income – 13% applicable to the next $52,488 of taxable income – 14% applicable to the next $104,976 of taxable income – 15% applicable to taxable income amounts over $314,928 |
| British Columbia | – 5.06% applicable to the first $43,070 of taxable income – 7.7% applicable to the next $86,141 of taxable income – 10.5% applicable to the next $98,901 of taxable income – 12.29% applicable to the next $120,094 of taxable income – 14.7% applicable to the next $162,832 of taxable income – 16.8% applicable to the next $227,091 of taxable income – 20.5% applicable to taxable income amounts over $227,091 |
| Yukon | – 6.4% applicable to the first $50,197 of taxable income – 9% applicable to the next $100,392 of taxable income – 10.9% applicable to the next $155,625 of taxable income – 12.8% applicable to the next $500,000 of taxable income – 15% applicable to taxable income amounts over $500,000 |
| Northwest Territories | – 5.9% applicable to the first $45,462 of taxable income – 8.6% applicable to the next $90,927 of taxable income – 12.2% applicable to the next $147,826 of taxable income – 14.05% applicable to taxable income over $147,826 |
| Nunavut | – 4% applicable to the first $47,862 of taxable income – 7% applicable to the next $95,724 of taxable income – 9% applicable to the next $155,625 of taxable income – 11.5% applicable to taxable income over $155,625 |
Overall, the tax changes for 2022 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.
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Veronica is a writer who specializes in creating unique and educational personal finance content. She has extensive experience writing blog posts for companies in the financial sector. Veronica's background is in accounting as she graduated from Western University in 2017 with a degree in accounting. She is passionate about using her accounting expertise to help others with their personal finance questions and issues and enjoys using her writing to educate Canadian readers. When Veronica is not writing, she enjoys film, reading, travelling, going to the gym, and listening to music.
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