How Tax Rates In Canada Changed In 2022

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.

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.

What Tax Changes Will Be Made 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 2.4% based on inflation.
The basic personal amount (the amount of tax-free annual income) has increased from $13,808 to $14,398 ($590 increase).
Employment Insurance (EI) premium is expected to remain the same as 2021 at 1.58%.
Canadian Pension Plan (CPP) contribution rate will increased from 5.45% to 5.7% for employees and the maximum pensionable earnings has gone up to $64,900.
The Canada Child Benefit (CCB) has been 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.

Check out which receipts you should keep for tax purposes.

What Effect Do These Tax Bracket Changes Have On Canadians?

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.

How Much Taxes Will I Have To Pay In 2022?

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 Brackets In Canada 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.

Provincial Tax Brackets In Canada 2022

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

Final Thoughts

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 Ott

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.