Every year, Canadians must file taxes and settle any dues under the rules set by the Canada Revenue Agency (CRA), governed by the Income Tax Act (ITA).
Canada employs a marginal tax rate system, where varying tax rates apply to different income levels, known as tax brackets. This structure adds complexity to the taxation process but is designed to be fair by redistributing wealth.
One of the challenging features of this system is the annual changes to the tax rates.
Here’s what you need to know and what to expect in 2024
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. Therefore, 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 based on the cost of a basket of various goods and services in Canada.
How Much Taxes Will I Have To Pay In 2024?
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 debt, 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 or have collateral to secure it, 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 on savings.
Federal Tax Brackets In Canada 2024
| Federal Tax Rate | Income Level |
| 15% | On incomes $55,867 and below. |
| 20.5% | On incomes between $55,867 to $111,733 |
| 26% | On incomes between $111,733 up to $173,205 |
| 29% | On income between $173,205 up to $246,752 |
| 33% | On incomes $246,752 and above |
Provincial Tax Brackets In Canada 2024
| Province/Territory | Tax Rate and Description |
| Newfoundland and Labrador | – 8.7% applicable to the first $43,198 of taxable income. – 14.5% applicable taxable income between $43,198 to $86,395 – 15.8% applicable to taxable income between $86,395 to $154,244 – 17.8% applicable to taxable income between $154,244 to $215,943 – 19.8% applicable to taxable income between $215,943 to $275,870 – 20.8% applicable to taxable income between $275,870 to $551,739 – 21.3% applicable to taxable income between $551,739 to $1,103,478 – 21.8% applicable to taxable incomes over $1,103,478 |
| Prince Edward Island | – 9.65% applicable to the first $32,656 of taxable income – 13.63% applicable to taxable income between $32,656 to $64,313 – 16.65% applicable to taxable income between $64,313 to $105,000 – 18.00% applicable to taxable income between $105,000 to $140,000 – 18.75% applicable to taxable income amounts over $140,000 |
| Nova Scotia | – 8.79% applicable to the first $29,590 of taxable income – 14.95% applicable to taxable income between $29,590 to $59,180 – 16.67% applicable to taxable income between $59,180 to $93,000 – 17.5% applicable to taxable income $93,000 to $150,000 – 21% applicable to taxable income amounts over $150,000 |
| New Brunswick | – 9.40% applicable to the first $49,958 of taxable income – 14% applicable to taxable income between $49,958 to $99,916 – 16% applicable to taxable income between $99,916 to $185,064 – 19.5% applicable to taxable income over $185,064 |
| Québec | – 14% applicable to the first $51,780 of taxable income – 19% applicable to taxable income between $51,780 to $103,545 – 24% applicable to taxable income between $103,545 to $126,000 – 25.75% applicable to taxable income amounts over $126,000 |
| Ontario | – 5.05% applicable to the first $51,446 of taxable income – 9.15% applicable to taxable income between $51,446 to $102,894 – 11.16% applicable to taxable income between $102,894 to $150,000 – 12.16% applicable to taxable income between $150,000 to $220,000 – 13.16% applicable to taxable income amounts over $220,000 |
| Manitoba | – 10.8% applicable to the first $47,000 of taxable income – 12.75% applicable to taxable income between $47,000 to $100,000 – 17.4% applicable to taxable income amounts over $100,000 |
| Saskatchewan | – 10.5% applicable to the first $52,057 of taxable income – 12.5% applicable to taxable income $52,057 to $148,734 – 14.5% applicable to taxable income amounts over $148,734 |
| Alberta | – 10% applicable to the first $148,269 of taxable income – 12% applicable to taxable income between $148,269 to $177,922 – 13% applicable to taxable income between $177,922 to $237,230 – 14% applicable to taxable income between $237,230 to $355,845 – 15% applicable to taxable income amounts over $355,845 |
| British Columbia | – 5.06% applicable to the first $47,937 of taxable income – 7.7% applicable to taxable income between $47,937 to $95,875 – 10.5% applicable to taxable income between $95,875 to $110,076 – 12.29% applicable to taxable income between $110,076 to $133,664 – 14.7% applicable to taxable income between $133,664 to $181,232 – 16.8% applicable to taxable income between $181,232 to $252,752 – 20.5% applicable to taxable income amounts over $252,752 |
| Yukon | – 6.4% applicable to the first $55,867 of taxable income – 9% applicable to taxable income between $55,867 to $111,733 – 10.9% applicable to taxable income between $111,733 to $173,205 – 12.80% applicable to taxable income between $173,205 to $500,000 – 15% applicable to taxable income amounts over $500,000 |
| Northwest Territories | – 5.9% applicable to the first $50,597 of taxable income – 8.6% applicable to taxable income between $50,597 to $101,198 – 12.2% applicable to taxable income between $101,198 to $164,525 – 14.05% applicable to taxable income over $164,525 |
| Nunavut | – 4% applicable to the first $53,268 of taxable income – 7% applicable to taxable income between $53,268 to $106,537 – 9% applicable to taxable income between $106,537 to $173,205 – 11.5% applicable to taxable income over $173,205 |
Other Tax Changes In 2024
There are several changes individuals need to be aware of for 2024.
- Federal tax brackets in Canada will increase by 4.7% based on inflation.
- The basic personal amount (the amount of tax-free annual income) has increased from $15,000 to $15,705 ($705 increase).
- Employment Insurance (EI) premiums are expected to be increased to 1.66%.
- Canadian Pension Plan (CPP) contribution rate will remain at 5.95% for employees and the maximum pensionable earnings have gone up to $68,500. However, starting in 2024, if you make above the maximum pensionable earnings, you’ll have to pay a second additional CPP contribution called CPP2.
- RRSP contribution limits for 2024 will now be $31,560 or 18% of earned income, whichever is lower.
- TFSA contribution limits are rising to $7,000 this year.
What Effect Do The Tax 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 4.7% 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 cities with greater costs of living may have higher inflation rates.
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, but they still need to file. 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 1.66%. The increase in EI premiums, along with an increase in maximum insurable earnings, which is indexed to inflation will have a slight effect on each paycheque.
TFSA Increase
The Tax Free Savings Account (TFSA) new amount will increase from $6,500 to $7,000. This means that eligible contributors will now have a cumulative contribution room of $95,000, assuming they didn’t contribute to a TFSA between 2009 and 2024 and were at least 18 in 2009.
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 taxable income. Taxes aren’t automatically deducted each month. You can ask that federal income tax be deducted from your monthly payment by: signing in to your My Service Canada Account
Old Age Security (OAS) For those who receive OAS, the new threshold payment for 2024 is $90,997. If you make more than the taxable income, your OAS will be reduced.
First Home Savings Accounts (FHSA)
The federal government has launched the new tax-free First Home Savings Account. The FHSA allows prospective first-time home buyers the opportunity to save up to $40,000 tax-free towards purchasing their first home, with a $8,000 contribution limit each year.
Multigenerational Home Renovation Tax Credit
This is another new credit, which began on January 1st, 2023. The new credit is equal to 15% of eligible expenses (up to $50,000) for renovations to permit an eligible person such as seniors or persons with disabilities to live with a relative or caretaker.
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 expedite the process and make sure you have everything in order.
