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.
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.
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:
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 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 |
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 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 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 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 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 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 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 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 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 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 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 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 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 |
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 Income Under 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.
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.
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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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