Canada Income Tax Calculator for 2020 & 2021

WOWA Trusted and Transparent

Estimate your 2020 & 2021 total income taxes with only a few details about your income and province. Find your average tax rate and how much tax you will have to pay on any additional income.

Results

Total Income
$ 50,000
Total Tax
$ 11,023.54
Income Tax
$ 7,792.29
EI Premiums
$ 790
CPP Contribution
$ 2,441.25
After-Tax Income
$ 38,976.46
Average Tax Rate
15.58%
Marginal Tax Rate
29.65%
Canada Federal and Ontario tax brackets 2020
Your taxable income places you in the following tax brackets.
Federal tax bracketFederal tax rates
Less than $13,229 0%
$13,230 to $48,53515%
$48,536 to $97,06920.5%
$97,070 to $150,47326%
$150,474 to $214,36829%
More than $214,369 33%
Ontario tax bracketOntario tax rates
Less than $15,714 0%
$15,715 to $44,7405.05%
$44,741 to $89,4829.15%
$89,483 to $150,00011.16%
$150,001 to $220,00012.16%
More than $220,001 13.16%

What is the CPP?

The CPP, short for the Canada Pension Plan, is a mandatory public retirement pension plan run by the Government of Canada. All Canadians over the age of 18 with employment income are required to contribute towards the CPP, with the exception of those employed in Quebec. Instead of the Canada Pension Plan, the Province of Quebec administers a similar pension plan, called the Quebec Pension Plan.

How does the CPP work?

You will contribute towards the CPP from your employment earnings from age 18 to 70. The CPP Investment Board then invests CPP funds. Once you retire, you will then receive a monthly retirement pension that is equal to a certain percentage of your lifetime average earnings.

The base CPP benefit provides a monthly pension of up to 25% of your contributory earnings for the best 40 years of earnings. With changes enhancing CPP contributions, the monthly pension amount can rise to up to 33.33% of your contributory earnings. This pension amount counts as income, and so you must pay income tax on your CPP benefit.

The earliest that you can receive your retirement pension is when you turn 60 years of age. If you have a disability, you may receive the CPP disability benefit if you are under the age of 65, or the CPP post-retirement disability benefit if you have already started to receive your CPP retirement pension.

If you start receiving your pension between 60 and before you turn 65, your pension amount will be permanently reduced at a rate of 0.6% for every month before age 65, for a maximum reduction of 36%.

Every month after age 65 permanently increases your pension amount by 0.7%, up to a maximum of 42% when you turn 70.

CPP Contribution Rate

YearMaximum Contributory EarningsContribution Rate (Employee/Employer)Combined Contribution Rate
2021$58,1005.45%10.9%
2020$55,2005.25%10.5%
2019$53,9005.10%10.2%
2018$52,4004.95%9.9%
2017$51,8004.95%9.9%

Source: Canada Revenue Agency

CPP Contributions

There are two parts to the CPP: the base CPP and the enhanced CPP.

Base CPP

For the base CPP, your base CPP Contribution amount will be 4.95% of your employment earnings between the basic exemption amount and the maximum contributory earnings amount. Your employer will also contribute an additional 4.95% of your earnings. This creates a combined annual contribution rate of 9.90%.

If you are self-employed, you must cover both the employee and employer contributions, for a total of 9.90%.

The basic exemption amount is $3,500. This means that if you make $3,500 or less, you will not have to make any CPP contributions.

The maximum contributory earnings amount increases every year, with it increasing between $1,000 to $3,000 per year. Any earnings over this maximum contributory amount will not require any additional contributions. For 2020, the maximum contributory earnings amount is $55,200. This increases to $58,100 for earnings in 2021.

CPP Enhancement

The CPP enhancement was introduced in January 2019 and is an additional supplement on top of the base CPP. Between 2019 and 2023, an additional contribution of 2% is gradually being rolled-out, shared equally between you and your employer. This means that you will contribute up to an additional 1% by 2023. For 2021, this enhanced CPP contribution is 0.5%.

Starting in 2024, enhancements will add an additional 8% contribution for earnings between the maximum contributory amount and 14% above that maximum contributory amount. This enhanced contribution is shared equally, 4% by the employer and 4% by the employee.

Maximum CPP Contribution 2020

The maximum CPP contribution by an employee for 2020 is $2,898.00, and the maximum by an employer is also $2,898.00. If you are self-employed, your maximum CPP contribution amount for 2020 will be $5,796.00, covering both the employee and employer portions.

YearMaximum Employee/Employer ContributionMaximum Self-Employed Contribution
2021$3,166.45$6,332.90
2020$2,898.00$5,796.00
2019$2,748.90$5,497.80
2018$2,593.80$5,187.60
2017$2,564.10$5,128.20

Source: Canada Revenue Agency

CPP Tax Deductions

If you are an employee, you can claim a 15% tax credit for your base CPP contribution, and a tax deduction for your enhanced CPP contribution. A non-refundable tax credit directly reduces the amount of tax that you owe, while a tax deduction reduces your taxable income.

If you are self-employed, you can claim a 15% tax credit on half of your base CPP contribution, and a tax deduction on the other half of your base CPP contribution. You can also claim a tax deduction on your enhanced CPP contribution.

CPP Tax Credit Rates

Base Employee ContributionBase Employer ContributionEnhanced Contribution
Employee15% Tax Credit-Tax Deduction
Self-Employed15% Tax CreditTax DeductionTax Deduction

Source: Canada Revenue Agency

Quebec Pension Plan (QPP)

Instead of the Canada Pension Plan, employees and employers in the Province of Quebec are required to contribute towards the Quebec Pension Plan. If you are self-employed, you are required to contribute both the employee QPP and employer QPP contribution amounts. If you are an Aboriginal person, you are not required to contribute towards the QPP.

Similar to the CPP, the QPP basic exemption amount is $3,500. This means that you do not have to make QPP contributions if your employment income is less than $3,500. QPP enhanced contributions will increase your QPP contribution amount by 0.2% in 2021.

Quebec Pension Plan Contribution Rates

YearMaximum Contributory EarningsContribution Rate (Employee/Employer)Combined Contribution Rate
2021$61,6005.9%11.8%
2020$58,7005.7%11.4%

Source: Revenu Québec

Employment Insurance (EI)

EI provides benefits to those who have lost their jobs, stopped working due to illness or injury, as well as maternity and caregiving leave. You will pay a premium of your annual earnings up to a maximum amount. Your employer will also pay EI premiums.

If you are self-employed, you may also participate in the EI program, however, you are not required to do so. Those who are self-employed are only eligible for special benefits, such as maternity, caregiver, and sickness benefits, and you must earn at least $7,555 to be eligible for benefits.

If you are in Quebec, your EI premium rates will be lower than Federal EI premium rates. However, employees in Quebec are also required to pay premiums for the Quebec Parental Insurance Plan (QPIP).

EI Premium Rates

YearMaximum Annual Insurable EarningsEI Premium RateMaximum Employee PremiumMaximum Employer Premium
2021$56,3001.58%$889.54$1,245.36
2020$54,2001.58%$856.36$1,198.90
2019$53,1001.62%$860.22$1,204.31
2018$51,7001.66%$858.22$1,201.51
2017$51,3001.63%$836.19$1,170.67

Source: Canada Revenue Agency

Quebec EI Premium Rates

YearMaximum Annual Insurable EarningsEI Premium RateMaximum Employee PremiumMaximum Employer PremiumCombined EI and QPIP Premium Rate
2021$56,3001.18%$664.34$930.081.674%
2020$54,2001.20%$650.40$910.561.694%
2019$53,1001.25%$663.75$929.25-
2018$51,7001.30%$672.10$940.94-
2017$51,3001.27%$651.51$912.11-

Quebec Parental Insurance Plan (QPIP) Employee Premium Rates

YearMaximum Contributory EarningsEmployee Premium RateMaximum Employee Premium
2021$83,5000.494%$412.49
2020$78,5000.494%$387.79

Quebec Parental Insurance Plan (QPIP) Self-Employed Premium Rates

YearMaximum Contributory EarningsSelf-Employed Premium RateMaximum Self-Employed Premium
2021$83,5000.878%$733.13
2020$78,5000.878%$689.23

Source: Revenu Quebec

How are dividends taxed in Canada?

There are two types of dividends in Canada: "Eligible Dividends" and "Other Than Eligible Dividends". Corporations will designate their dividends as either “eligible” or “other than eligible” for tax purposes.

Dividends are paid out of a corporation's after-tax profits. This means that tax has already been paid on the dividend amount. However, not all corporations have the same tax rate.

Canadian Controlled Private Corporation (CCPCs) are eligible for the small business deduction, which reduces their corporate income tax rate. Dividends paid out by them are "other than eligible". Since a lower amount of tax has already been paid on them, you will receive a smaller tax credit rate.

Public corporations are not eligible for the small business deduction, and so their dividends are designated as eligible dividends. As a higher tax rate applies to these public corporations, your dividend tax credit amount will be larger.

A dividend gross-up multiples your actual dividend amount by a certain multiplier, which attempts to replicate what the dividend-paying corporation had to earn in order to pay out the dividend after taxes.

Dividend Tax Credit

Dividends count as income and will be taxed at your personal income rate, however, federal dividend tax credits will reduce the amount of tax owed. You may also receive provincial dividend tax credits depending on your province. Dividend tax credits are claimed on your personal income tax returns.

Eligible DividendsOther Than Eligible Dividends
Dividend Gross-Up138%115%
Federal Dividend Tax Credit15.0198%9.0301%

Source: Canada Revenue Agency

Example Federal Dividend Tax Credit (Ontario)

Eligible DividendsOther Than Eligible Dividends
Dividend Received$100$100
Dividend Gross-Up138%115%
Taxable Dividend$138$115
Federal Dividend Tax Credit15.0198%9.0301%
Ontario Dividend Tax Credit10%2.9863%
Combined Dividend Tax Credit$34.52$13.81

Capital Gains

Capital gains is money that you make (or lose) when you sell capital property. This can include stocks and bonds, or land and equipment used in a business. A capital gain is when you sell your capital property for more than you paid for it. Similarly, a capital loss is when you sell for less than you paid for it.

Capital gains and capital losses are unrealized until you sell them. When you sell them, they become realized capital gains or losses.

Capital Gains Tax Canada

There is no special capital gains tax in Canada. Instead, capital gains are taxed at your personal income tax rate. Only 50% of your capital gains are taxable. This means that only half of your capital gains amount will be added to your taxable income.

If you have incurred both capital gains and losses, you can use your capital losses to offset the amount of your capital gains. For example, if you have capital gains of $10,000 and losses of $4,000, your net capital gain would be only $6,000.

You can rollover your capital losses to offset capital gains in the future, or you can retroactively apply them to capital gains that you have realized in the past three years. For example, if you have capital gains of $10,000 and losses of $14,000, your capital gains for that year would be $0. You can then roll over the leftover capital loss of $4,000 to apply to future years, or the previous three years.

Canadian Income Tax Brackets

Tax Brackets are ranges of income that determine how much tax you will have to pay on the income in that bracket. Each bracket has a lower and upper limit as well as a tax rate.

If you earn more than the lower limit, you will have to pay that tax rate on any additional income up to the upper limit. Any amount beyond the upper limit will be taxed based on the next tax bracket. Each province has their own set of tax brackets, which can differ from the federal tax brackets.

For example, if you earn $80,000, you will be in the $49,020 to $98,040 tax bracket with a tax rate of 20.5%. This means that you are taxed at 20.5% from your income above $49,020 ($80,000 - $49,020). Any additional income up to $98,040 will be taxed at the same rate. Any income beyond the upper limit will be taxed at the next tax bracket rate of 26%.

At $80,000, you will also have income in the lower two tax brackets: $0 to $13,229 and $13,230 - $49,020. Your income within those brackets ($13,229 and $35,791) will be taxed at their respective tax rates of 0% and 15%.

The basic personal amount of $13,229 has a tax rate of 0%. This means that if you make $13,229 or less, you will not have to pay any federal income tax. Different provinces have different basic personal amounts. The basic personal amount will gradually increase to $15,000 by 2023.

A common misconception is that when you go up to a higher tax bracket with a higher tax rate, you will have to pay more taxes on all of your income. That is not true. Only the additional income in the higher tax bracket will be taxed at the higher rate and your income in the lower brackets will be taxed at their lower respective rates.

Marginal Tax Rate

Your Marginal Tax Rate is the amount of tax you will have to pay on any additional income. It is determined by your provincial and federal tax brackets. If you earn enough to go into the next tax bracket, your marginal tax rate will increase for any additional income after that point. If you earn less than you expect and go into a lower tax bracket, your marginal tax rate will also go down.

For example, if you earn $80,000 and live in Ontario, your marginal tax rate will be 31.48%. If you earn an extra $1,000, you will have to pay an additional 31.48% of that amount in tax, or $314.80.

This calculator is provided for general information purposes only. WOWA does not guarantee the accuracy of information shown and is not responsible for any consequences of the use of the calculator.