In the majority of Canada, when you purchase an item you’ll notice your receipts have a Goods and Services Tax (GST) and a Provincial Sales Tax (PST). These two taxes reflect the taxes collected by the federal and provincial governments when you make a purchase. In addition to that, we pay taxes on our income. But how much are you paying? Do you know? Well, the amount you pay depends on your federal and provincial income tax rates.
What Are Tax Rates?
In Canada, every year all individuals and businesses must report their income for tax purposes. As mentioned, the amount you pay is dependent on your tax rate, also known as your tax bracket, which corresponds to your income level and the province you live in. To understand this you need to understand the tax system used in Canada.
Canada uses a marginal tax rate system to determine how much taxes you will have to pay. The way this system works is the higher your income is, the more you will be taxed. However, it is important to note that your entire income isn’t taxed at one rate but at multiple rates depending on your income level.
What If You Can’t Afford To Pay Your Taxes?
Whether you weren’t expecting to pay as much in taxes or struggling with other debts, there can be a number of reasons why you may not be able to afford to pay your taxes. Fortunately, there are a few things you can do:
Contact The CRA – If you’re unable to pay your taxes outright, you can contact the CRA to create a payment plan that will allow you to repay your taxes owed in installments. Similarly, if you’ve experienced a major life event that has disrupted your finances, you may qualify for taxpayer relief. This will waive any penalties and interest on paying your taxes late.
Use A Personal Loan – If the CRA doesn’t think you qualify for a payment plan, you can opt for a personal loan. You can spread your tax debt over a few months or years, depending on your financial situation. Before choosing this option, it’s best to clean up your finances as much as you can. This will help you qualify for a low-interest rate. This is crucial to keep your payments and costs low. One of the best things you can do is to check your credit score and ensure it is within at least the fair range (659 – 560).
Tax Rates
While the federal tax rates are the same for everybody in Canada, provincial tax rates differ by province. Below, we’ve depicted the rates you’ll have to pay based on your income. Of course, as mentioned above, this amount is usually deducted from your paycheque, but if you’re a gig worker or contract worker, you’ll want to put this money aside for tax season.
Federal Tax Rate
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 Income Tax Rates
Depending on the province you live in, the taxes you’ll need to pay will vary. While some provinces have lower rates and higher tax brackets, others have high rates and lower tax brackets. Of all the provinces, Quebec is known to have the highest provincial taxes rates in Canada.
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 Income Tax Brackets And Tax Rates
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
How Does The Provincial Income Tax Rate Work?
In Canada, there are 5 tax brackets you can fall in at a federal level and depending on the province you live in, there may be more or less than that. Similarly, depending on how high your income is, you can fall into one or more of the tax brackets. However, only a portion of your income is subject to each bracket.
So, while a portion of your income will always be taxed at the lowest rate, you’ll only be subject to the higher tax rate if your income meets that tax bracket. The marginal tax system may be hard to comprehend, but it’s easy to understand when seen as an example.
For example, if you make $120,000 in Ontario, you’d be subject to 3 of the 5 tax brackets seen below.
Ontario Tax Rate
Ontario Income Tax Brackets
Taxable IncomeUnder Each Bracket
5.05%
Applicable to taxable income up to $49,231
$49,231 x 5.05%
9.15%
Applicable to taxable income over $49,231 up to $98,463
$49,232 x 9.15%
11.16%
Applicable to taxable income over $98,463 up to $150,000
$21,537 x 11.6%
12.16%
Applicable to taxable income over $150,000 up to $220,000
13.16%
Applicable to taxable income over $220,000
As seen in the table, only a portion of your income is taxed at each tax bracket. Don’t forget, this accounts for just the provincial taxes, you’ll have to also consider the federal tax rates to see how much taxes you owe.
It is incredibly advantageous to know which tax bracket you fall in, especially as a contract or gig worker. Understanding which tax bracket you fall in can help you calculate your tax bill and plan how you can reduce the amount you owe. Of course, for employees, this tax amount is deducted from your paycheque.
Are Provincial Income Tax Rates Fair: Bottom Line
As Supreme Court Justice Oliver Wendell Holmes Jr said “taxes are the price we pay for civilization”. The roads, education, health care, and all other public services we have access to are all funded by the taxes we pay. Besides paying your taxes, understanding the tax system is also important because it will help you save money during tax season.
Provincial Income Tax Rates FAQs
Why Do We Pay Taxes?
Taxes maintain the quality of life we enjoy as Canadians. Taxes collected by the federal and provincial government helps provide funding for a number of programs and services we use and rely on such as health care, education, roads, waste collection, and other economic and cultural activities.
Why Are The Tax Rates Different By Province?
Due to the division of legislative powers between the federal and provincial governments, each province in Canada manages its own finances. As such, each province has its own financial priorities, responsibilities, and problems. Depending on your province’s budget and economic plans, the province can adjust their provincial tax to match their needs. For example, in Canada, Quebec has the highest tax rates, but as a result, it has cheaper tuition, affordable daycares, and extra tax credits like the solidarity tax credit.
Why do we have a marginal tax system?
The main advantage of a marginal tax system is that it relies on the affluent to support the government more than those who have a lower income. This ensures that the taxes collected from low-income earners are not affecting their quality of life and that the amount of taxes collected is affordable for everyone.
Priyanka Correia is a Marketing Coordinator and personal finance expert at Loans Canada. Priyanka completed her Bachelor's degree in Marketing at Concordia University and has published work that has been mentioned in various news media. She is passionate about money management and educating Canadian consumers about how to take control of their financial lives.
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