British Columbia Income Tax Brackets
Tax brackets in British Columbia are indexed to the B.C. Consumer Price Index (BC CPI). This means each year the tax brackets increase to adjust for inflation. By doing this, the provincial government can be sure that inflation is not pushing you into a higher tax bracket and forcing you to pay more taxes. In 2021, the tax brackets increased by 1.1% from the prior year.
Anticipated 2022 Changes
As previously mentioned, the income tax brackets rise every year to match the consumer price index (CPI) increase. In 2022, the BC provincial tax brackets are expected to increase by 2.1%. However, this has not been confirmed by the Canada Revenue Agency. There have been no announcements about the 2022 provincial income tax or tax reduction credit.
The History of BC Provincial Income Taxes
From 1991 to 2000, BC had a consecutive streak of New Democratic Party Premiers. As a result, there were not many changes to the income tax policy. However, in 2001, Premier Gordon Campbell (Liberal) was elected and slashed income tax rates by 25% in each tax bracket. Following Campbell’s ten-year run, Premier Christy Clark (Liberal) took office in 2011. She did not change the income tax rates but slashed the Medical Services Plan (MSP) premiums. Clark also increased the tax reduction credit in 2016.
After 16 years of Liberal control, Premier John Horgan (NDP) took office in 2017. In the 2019/20 year, he increased the tax rate from 14.7% to 16.8% for those with incomes over $155,000.
British Columbia Provincial Income Tax Changes 2021
| 2020 | 2021 | Rate |
|---|---|---|
| Less than $10,949 | Less than $11,070 | 0% |
| $10,950 to $41,725 | $11,070 to $42,184 | 5.06% |
| $41,726 to $83,451 | $42,185 to $84,369 | 7.70% |
| $83,452 to $95,812 | $84,370 to $96,866 | 10.50% |
| $95,813 to $116,344 | $96,867 to $117,623 | 12.29% |
| $116,345 to $157,748 | $117,624 to $159,483 | 14.70% |
| $157,749 to $220,000 | $159,484 to $222,420 | 16.80% |
| More than $220,000 | More than $220,420 | 20.50% |
B.C. Tax Reduction Credit
The B.C. tax reduction credit gives a non-refundable tax credit for those with net income below a certain amount. For the 2021 tax year, individuals with an income below $21,418 can deduct up to $481 from their income tax bill. However, this tax credit is reduced by 3.56% for income above $21,418, meaning that the maximum income eligible for the tax reduction credit is $34,929.
For example, if your income is $25,000, your tax reduction credit will be $481 minus 3.56% of your income above $21,418, which will reduce your credit by $127.52. This gives you a tax reduction credit of $353.48.
B.C. Tax Reduction Credit Changes
| 2020 | 2021 | |
|---|---|---|
| Maximum Credit | $476 | $481 |
| Maximum Income Eligible for Maximum Credit | $21,185 | $21,418 |
| Maximum Income Eligible for Reduced Credit | $34,556 | $34,929 |
| Credit Reduction Factor | 3.56% of income above $21,185 | 3.56% of income above $21,418 |
Source: Government of British Columbia
B.C. Tax Reduction Credits Examples
| Income | Calculation | Tax Reduction Credit |
|---|---|---|
| $21,418 | $481 - $0 | $481 |
| $25,000 | $481 - (($25,000 - $21,418) x 3.56%) | $353.48 |
| $30,000 | $481 - (($30,000 - $21,418) x 3.56%) | $175.48 |
| $34,929 | $481 - (($34,556 - $21,418) x 3.56%) | $0 |
British Columbia Personal Amounts
B.C.'s basic personal amount for 2021 is $11,070. The 2022 amount has not been announced yet but is anticipated to be around $11,302.47 (a 2.1% increase from 2021).
You will also receive non-refundable tax credits if you have a spouse/common-law partner or an eligible dependent.
British Columbia Personal Amounts 2021
| Basic Personal Amount | $11,070 |
| Spouse or Common-Law Partner | $10,427 |
| Eligible Dependant | $10,427 |
Canada Pension Plan and Employment Insurance
The Canada Pension Plan (CPP) is a monthly, taxable stipend paid out as part of your income in retirement. The amount you get in retirement is determined by your average earnings, contributions to the program, and the age you start receiving payments. To be eligible for CPP, you must be over 60 and have made valid contributions.
If you are employed in British Columbia, you will be required to contribute towards both the Canada Pension Plan (CPP) and pay Employment Insurance (EI) premiums. Employers will jointly contribute to CPP and match your EI payments at a typical rate of 1.4x. Self-employed individuals have the option of contributing to EI. However, self-employed people must fully contribute to CPP instead of splitting the cost with their employer.
Prior to January 1, 2020, residents of British Columbia were also required to pay premiums towards the Medical Services Plan (MSP). MSP premiums have been eliminated.
Employers with an annual remuneration greater than $500,000 will still be required to pay the B.C. employer health tax.