Income Tax Calculator for 2024 and 2025
Estimate your income taxes by providing a few details about yourself and your income.
These calculations include the following tax credits: basic personal amount, Canada employment amount, CPP/QPP, CPP2/QPP2, QPIP, EI premiums, dividend tax credits, Canada workers benefit (CWB), and Ontario LIFT. You may be eligible for other tax credits based on your province and income.
| Federal tax bracket | Federal tax rates |
|---|---|
| $55,867 or less | 15% |
| $55,868 to $111,733 | 20.5% |
| $111,734 to $173,205 | 26% |
| $173,206 to $246,752 | 29% |
| More than $246,753 | 33% |
| Ontario tax bracket | Ontario tax rates |
|---|---|
| Up to $51,446 | 5.05% |
| $51,447 to $102,894 | 9.15% |
| $102,895 to $150,000 | 11.16% |
| $150,001 to $220,000 | 12.16% |
| More than $220,001 | 13.16% |
If you owe taxes to the government as an individual, you are legally obliged to file your income taxes (submit form T1) for the previous year and pay them by the end of April. For self-employed individuals or those with a self-employed partner, the filing deadline is June 15, while the payment deadline is the same as others on April 30. Even if you do not owe any taxes for the previous year, it is best to file your tax return as it will ensure that benefits such as the Canada Child Benefit can be paid.
A corporation must file its T2 Corporate Income Tax Return no later than six months after the end of its fiscal year. Most corporations must pay any corporate taxes owed within two months after their fiscal year-end. However, Canadian-controlled private corporations (CCPCs) may have up to three months if they meet specific conditions.
Canada's personal income tax system is progressive, meaning individuals pay higher tax rates as their income increases. The federal government, along with each province and territory, collects income taxes based on graduated tax brackets. Every resident is required to report worldwide income on their annual T1 General Tax Return. Income is classified into different types, such as employment income, business income, investment income, rental income, and capital gains, each subject to specific tax rules.
Canada has five main tax brackets at the federal level, with rates ranging from 15% to 33% (as of 2025). Provinces and territories levy their own income taxes, which vary significantly, with Alberta using a flat tax structure for higher incomes, while most other provinces follow a progressive system. Taxable income is determined by subtracting allowable deductions (e.g., RRSP contributions, business expenses, childcare costs) from total income. Non-refundable tax credits (e.g., Basic Personal Amount, medical expenses, charitable donations) reduce taxes payable but cannot create a refund, while refundable credits (e.g., GST/HST credit, Canada Workers Benefit) can result in direct payments to individuals.
Self-employed individuals must pay both employee and employer portions of the Canada Pension Plan (CPP) or Quebec Pension Plan (QPP), which increases their effective tax burden. Capital gains are taxed favourably, with only 50% of the gain included in taxable income, and Canadian dividends benefit from the dividend tax credit, reducing overall tax rates on investment income. Some income, such as the Canada Child Benefit (CCB) GST/HST rebates, is entirely tax-free.
Canada's tax system is enforced by the Canada Revenue Agency (CRA), which administers tax laws and audits returns for compliance. Canadians can optimize their tax liabilities by utilizing registered savings plans like RRSPs (tax-deferred) and TFSAs (tax-free growth), claiming eligible deductions, and strategically planning income distributions. The system also includes progressive tax relief through credits and benefits, ensuring lower-income individuals and families receive financial support while higher-income earners contribute a larger share of revenue.
History of Income Tax in Canada
Surplus/Deficit vs. Income Tax Share (2008–2023)
Larger Budget Deficits Historically End With Increased Income Taxes
Like you, the Government of Canada must earn income to fund expenses. The government earns revenue through taxes, such as on income, corporations, capital gains, and sales taxes. The government invests in social projects, infrastructure, education and more with this revenue. The federal budget for a fiscal year estimates the government’s income and expenses in that year. There is a budget deficit when the costs are higher than income, and if the income exceeds expenses, there is a surplus.
If there is a deficit, the government must borrow money to make up for the difference in expenses. To borrow money, the government issues T-Bills or bonds, which you can think of as IOU notes that the government promises to repay in the future. The government generally needs to increase income to pay off debt, which means higher taxes. Personal income taxes are a crucial part of the government's revenue. At its peak, they made up 40.8% of federal revenue in 1990. The following section will explore the history of personal income tax changes in Canada related to the federal budget.
World War I
Canada's personal income tax was first introduced as a temporary measure during the First World War. The purpose of the tax was to help finance the war effort. The tax was imposed on "taxable income," defined as income from business, property, and personal services. The government also introduced a corporate income tax.
Income tax became permanent in 1926 and has been part of the Canadian tax system ever since. The corporate income tax was also made permanent at this time.
The Great Depression and World War II
During the Great Depression, the government increased personal and corporate income taxes to help balance the budget. The government also introduced new taxes, such as on retail sales. World War II led to even more changes in the taxation system. The government needed to finance the war effort by increasing income taxes and introducing new taxes. For example, an inheritance tax was created.
Income Taxes in the 1950s and 1960s
After the Second World War, the government began to reduce income taxes. The highest marginal rate (the tax rate on the last dollar of income) was reduced from high-90s in 1945 to mid-70s by 1966. The government also began to exempt more income from taxation and introduced deductions and credits, lowering people's tax amounts.
The 1970s and 1980s
The oil crisis in 1973 led to an increase in inflation and interest rates. This resulted in higher government borrowing costs and decreased revenue from personal and corporate income taxes. To help balance the budget, the government once again increased income taxes. This is shown in the chart above, where personal income taxes became a more significant part of federal revenue.
The 1990s
The government began reducing the highest marginal tax rate in the 1990s. The government also introduced several tax credits, which reduced people's amount of tax. For example, the government introduced the child care expense credit and the working income tax credit.
The 2000s
Since 2000, the federal government has continued to reduce personal income taxes. The highest marginal federal tax rate is now 33%. The government has also introduced new tax credits, such as public transit and home renovation costs.
The Future of Tax in Canada
The government is always looking for ways to increase revenue, and one way to do this is by raising taxes. The other way to have a budget surplus is to decrease expenses. As the Baby Boomer generation begins to retire, the government will have to find ways to reduce costs, as there will be fewer people working and paying taxes. One way the government may do this is by raising the retirement age.
Another method could be changing the eligibility requirements for specific programs, such as eligibility for Old Age Security or Employment Insurance. The government may also choose to reduce the amount of money in tax credits or deductions.
No matter what changes the government makes to taxes in the future, it is essential to remember that taxes are necessary to fund the many services that the government provides, such as education, health care, and infrastructure.
How The Government Spends Your Tax Money
The elected government has the most considerable impact on how your tax payments are allocated. Many Prime Minister candidates will announce their platform while running for the position. Their platform will highlight how they intend to spend tax revenue throughout their term. This section will explain the preferred spending habits of the major political parties in Canada.
Categorized General (all levels of) Government Spending
Liberal Party
The current elected government party in Canada. However, with a minority government, the NDP influences much of their spending. In general, the Liberal Party focuses on improvements to housing and child care. They are slightly less inclined to raise taxes compared to the NDP to fund these initiatives. Although the Liberal Party raised taxes on the 1% of earners, they have not implemented the wealth tax proposed by the NDP.
Conservative Party
Consequently, the Conservative Party typically prefers to cut spending altogether. Their goal is to decrease government spending and reduce the amount of tax revenue required. As a result, Conservative Party voters typically expect tax breaks and cuts.
New Democratic Party (NDP)
The NDP has partnered with the Liberal party to influence governmental policy. No single party has a majority government in the House of Commons right now, meaning multiple parties must ally to pass bills. The NDP proposes significant increases in healthcare spending such as universal coverage for prescription drugs, dental care, and mental health. Additionally, they want to enhance spending on climate change initiatives, and Indigenous reconciliation. To finance the increased costs, they propose to increase the corporate tax rate from 15% to 18% and increase the capital gains inclusion rate from 50% to 75%.
Bloc Québécois
The Bloc Québécois is a separatist party that primarily focuses on the well-being of Quebec. They do not have much impact on tax policy as they only have a few seats in the House of Commons.
Green Party
The Green Party is newer to Canadian politics but has been rapidly growing in popularity. They focus on environmental policies and sustainability. Their budget policies focus on increasing ecological protection while increasing corporate taxation.
Tax Credits and Deductions
A tax credit in Canada directly reduces the income tax you must pay. For example, a $1,000 tax credit can directly be applied to lower the tax you need to pay by the same amount. If you have a tax bill worth $13,000, you can use the $1,000 to reduce your payment to $12,000. It is important to understand what can be deducted from your tax base to make sure that your net worth does not get hurt due to overpaying for taxes. It’s essential to understand the difference between refundable and non-refundable tax credits. A refundable credit will deposit the excess amount into your bank account if your credits exceed your tax bill. However, a non-refundable credit will not provide you with the unused portion. Some of the most popular tax credits in Canada include:
- Home Renovation Tax Credit: Many provinces in Canada allow senior homeowners to receive a tax credit by renovating their home to increase accessibility. Additionally, some provinces, such as Manitoba, offer a tax credit for purchasing green energy equipment.
- Home Buyers’ Amount: This is a non-refundable $10,000 tax credit for first-time homebuyers.
Some tax credits pay out directly to your bank account as a Canada PRO deposit, such as the Ontario Trillium Benefit for energy, property tax, and sales tax credits.
On the other hand, a tax deduction reduces your taxable income. As a result, there is not a direct one-to-one decrease as there is with credit. For example, if you had a $1,000 deduction in 2023 that reduced your taxable income from $50,000 to $49,000, you would only save $232. In some cases, a deduction may be rolled over to future years. This means if you expect a high taxable income in a future year, you can save the deduction to lower your taxable amount. Some of the most popular tax deductions in Canada include:
- RRSP Contributions: You may reduce your taxable income by contributing to your RRSP. However, you may only contribute the lower of 18% of your income, or $31,560, for the 2024 tax year ( $30,780 for the 2023 tax year). First-time homebuyers can also take advantage of the RRSP First Time Home Buyers Incentive for a tax-free way to fund their down payment. You can find out about how RRSP works by using the RRSP calculator.
- Mortgage Payments: Landlords in Canada can deduct the interest portion of mortgage payments and depreciation from their rental property income. However, regular homeowners can also use the Smith Maneuver to deduct HELOC interest payments while investing the proceeds.
- Moving Expenses: You may be able to deduct qualifying moving expenses from your income if you relocated at least 40 km closer to your workplace or school.
- Child Care Expenses: You may be able to deduct eligible child care expenses if you live with and care for a child in Canada.
What is the CPP?
The Canada Pension Plan (CPP) is a mandatory public retirement pension program administered by the Government of Canada. If you're over 18 and earn employment income in Canada, you must contribute to the CPP—unless you work in Quebec. Quebec residents instead participate in the Quebec Pension Plan (QPP), a similar program administered by the Quebec provincial government. Both plans provide retirement, disability, and survivor benefits based on your contributions throughout your working years. Your CPP or QPP contributions are automatically deducted from your employment income and are matched by your employer.
How does the CPP work?
Your CPP contributions begin with your first paycheck at age 18 and continue until age 70 unless you choose to start collecting benefits (or opting out) earlier. The CPP Investment Board manages and invests these funds to ensure the plan's long-term sustainability. The enhanced CPP program is increasing the maximum retirement benefit from 25% to 33.33% of your average career earnings, calculated using your best 40 years. When you begin receiving payments, they become part of your taxable income.
Your retirement pension amount depends on when you choose to start collecting:
Age 60-64:
This is the earliest you can begin receiving payments
Your benefit is reduced by 0.6% for each month before age 65
Starting at 60 results in a permanent 36% reduction
Age 65:
This is the standard retirement age
You receive your full calculated pension amount
Age 65-70:
Your benefit increases by 0.7% for each month you delay
Waiting until 70 provides a 42% increase
No additional increases (or contributions) after age 70
Disability Benefits:
If you become disabled before 65, you may qualify for CPP disability benefits.
Those aged 60-65 who are already receiving retirement benefits may be eligible for the post-retirement disability benefit.
Disability benefits convert to retirement benefits at 65.
These amounts are adjusted annually based on the Consumer Price Index to help protect against inflation, ensuring your benefits maintain purchasing power throughout retirement.
CPP Contributions
There are two parts to the CPP — the base CPP and the enhanced CPP.
CPP Contribution Rate
For the 2023, 2024 and 2025 tax years, your CPP Contribution amount is 5.95% (4.95% base contribution and 1% for the first CPP enhancement) of your employment earnings between the basic exemption amount and the maximum contributory earnings amount. Your employer will also contribute an additional 5.95% of your earnings. This creates a combined annual contribution rate of 11.90%.
- If you are self-employed, you must cover both the employee and employer contributions, for a total of 11.90%.
- 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 earning is the maximum annual pensionable earnings less the basic exemption amount. The maximum contributory earnings amount is $67,800 for 2025, up from $65,000 in 2024 and $63,100 in 2023. This amount is indexed to inflation.
CPP Contribution
| Year | Maximum Annual Pensionable Earnings | Maximum Contributory Earnings | Contribution Rate (Employee/Employer) | Maximum Contribution (Employee/Employer) | Combined Maximum Contribution |
|---|---|---|---|---|---|
| 2025 | $71,300 | $67,800 | 5.95% | $4,034.1 | 8,068.2 |
| 2024 | $68,500 | $65,000 | 5.95% | $3,867.50 | $7,735.00 |
| 2023 | $66,600 | $63,100 | 5.95% | $3,754.45 | $7,508.90 |
| 2022 | $64,900 | $61,400 | 5.70% | $3,499.80 | $6,999.60 |
| 2021 | $61,600 | $58,100 | 5.45% | $3,166.45 | $6,332.90 |
| 2020 | $58,700 | $55,200 | 5.25% | $2,898.00 | $5,796.00 |
| 2019 | $57,400 | $53,900 | 5.10% | $2,748.90 | $5,497.80 |
| 2018 | $55,900 | $52,400 | 4.95% | $2,593.80 | $5,187.60 |
| 2017 | $55,300 | $51,800 | 4.95% | $2,564.10 | $5,128.20 |
Source: Canada Revenue Agency
Second CPP Enhancement (CPP2)
Till 2023, any earnings over the maximum annual pensionable earnings did not require any additional contributions. From 2024, an additional CPP component, known as CPP2, will apply. The CPP2 will apply to the portion of income between the maximum annual pensionable earnings limit amount and the additional maximum pensionable earnings. CPP2 will add an additional 8% contribution for earnings between the maximum pensionable earnings and additional maximum pensionable earnings. This enhanced contribution is shared equally, 4% by the employer and 4% by the employee.
CPP2 Contribution
| Year | Additional Maximum Annual Pensionable Earnings | Contribution Rate (Employee/Employer) | Maximum Contribution (Employee/Employer) | Combined Contribution Rate | Combined Maximum Contribution |
|---|---|---|---|---|---|
| 2025 | $81,200 | 4% | $396 | 8% | $792 |
| 2024 | $73,200 | 4% | $188 | 8% | $376 |
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 Contribution | Base Employer Contribution | Enhanced Contribution | |
|---|---|---|---|
| Employee | 15% Tax Credit | - | Tax Deduction |
| Self-Employed | 15% Tax Credit | Tax Deduction | Tax 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.
Quebec Pension Plan Contribution Rates
| Year | Maximum Pensionable Earnings | Contribution Rate (Employee/Employer) | Combined Contribution Rate |
|---|---|---|---|
| 2025 | $71,300 | 6.4% | 12.8% |
| 2024 | $68,500 | 6.4% | 12.8% |
| 2023 | $64,900 | 6.4% | 12.8% |
| 2022 | $64,900 | 6.15% | 12.3% |
| 2021 | $61,600 | 5.9% | 11.8% |
| 2020 | $58,700 | 5.7% | 11.4% |
Source: Revenu Québec
Similar to the CPP2, for income over the maximum pensionable earnings ($71,300 in 2025), a second additional contribution is also required in Quebec – QPP2. The rates and calculations applicable are the same as CPP2.
Employment Insurance (EI)
Employment Insurance (EI) provides financial support to eligible workers who have lost their job, are unable to work due to illness or injury, or need to take maternity or caregiving leave. As an employee, you contribute to EI through premiums deducted from your earnings up to a maximum annual amount. Your employer also makes EI premium contributions.
Self-employed individuals can opt into the EI program voluntarily, though participation is not mandatory. However, self-employed participants are only eligible for special benefits, including maternity, caregiving, and sickness benefits. To qualify for these benefits in 2025, you must have earned a minimum net self-employed earnings of $8,826 in 2024.
Quebec residents pay lower EI premium rates compared to other provinces, as Quebec maintains its own parental benefits program. However, Quebec employees must also contribute to the Quebec Parental Insurance Plan (QPIP), which provides maternity, paternity, parental, and adoption benefits to eligible Quebec residents.
EI Premium Rates
| Year | Maximum Annual Insurable Earnings | EI Premium Rate | Maximum Employee Premium | Maximum Employer Premium |
|---|---|---|---|---|
| 2025 | $65,700 | 1.64% | $1,077.48 | $1,508.47 |
| 2024 | $63,200 | 1.66% | $1049.12 | $1,468.77 |
| 2023 | $61,500 | 1.63% | $1002.45 | $1,403.43 |
| 2022 | $60,300 | 1.58% | $952.74 | $1,333.84 |
| 2021 | $56,300 | 1.58% | $889.54 | $1,245.36 |
| 2020 | $54,200 | 1.58% | $856.36 | $1,198.90 |
| 2019 | $53,100 | 1.62% | $860.22 | $1,204.31 |
| 2018 | $51,700 | 1.66% | $858.22 | $1,201.51 |
| 2017 | $51,300 | 1.63% | $836.19 | $1,170.67 |
Source: Canada Revenue Agency
Quebec EI Premium Rates
| Year | Maximum Annual Insurable Earnings | EI Premium Rate | Maximum Employee Premium | Maximum Employer Premium | Combined EI and QPIP Premium Rate |
|---|---|---|---|---|---|
| 2025 | $65,700 | 1.31% | $860.67 | $1,202.31 | 1.804% |
| 2024 | $63,200 | 1.32% | $834.24 | $1,167.94 | 1.814% |
| 2023 | $61,500 | 1.27% | $781.05 | $1,093.47 | 1.764% |
| 2022 | $60,300 | 1.20% | $723.60 | $1,013.04 | 1.694% |
| 2021 | $56,300 | 1.18% | $664.34 | $930.08 | 1.674% |
| 2020 | $54,200 | 1.20% | $650.40 | $910.56 | 1.694% |
| 2019 | $53,100 | 1.25% | $663.75 | $929.25 | - |
| 2018 | $51,700 | 1.30% | $672.10 | $940.94 | - |
| 2017 | $51,300 | 1.27% | $651.51 | $912.11 | - |
Quebec Parental Insurance Plan (QPIP) Employee Premium Rates
| Year | Maximum Contributory Earnings | Employee Premium Rate | Maximum Employee Premium |
|---|---|---|---|
| 2025 | $98,000 | 0.494% | $484.12 |
| 2024 | $94,000 | 0.494% | $464.36 |
| 2023 | $91,000 | 0.494% | $449.54 |
| 2022 | $88,000 | 0.494% | $434.72 |
| 2021 | $83,500 | 0.494% | $412.49 |
| 2020 | $78,500 | 0.494% | $387.79 |
Quebec Parental Insurance Plan (QPIP) Self-Employed Premium Rates
| Year | Maximum Contributory Earnings | Self-Employed Premium Rate | Maximum Self-Employed Premium |
|---|---|---|---|
| 2025 | $98,000 | 0.878% | $860.44 |
| 2024 | $94,000 | 0.878% | $825.32 |
| 2023 | $91,000 | 0.878% | $798.98 |
| 2022 | $88,000 | 0.878% | $772.64 |
| 2021 | $83,500 | 0.878% | $733.13 |
| 2020 | $78,500 | 0.878% | $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 multiplies your actual dividend amount by a specified factor, representing the pre-tax corporate income required to pay that dividend. This calculation reflects the total earnings the corporation needed before corporate taxes were applied, effectively 'grossing up' the dividend to its original pre-tax value.
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 Dividends | Other Than Eligible Dividends | |
|---|---|---|
| Dividend Gross-Up | 138% | 115% |
| Federal Dividend Tax Credit | 15.0198% | 9.0301% |
Source: Canada Revenue Agency
Example Dividend Tax Credit, Ontario
| Eligible Dividends | Other Than Eligible Dividends | |
|---|---|---|
| Dividend Received | $100 | $100 |
| Dividend Gross-Up | 138% | 115% |
| Taxable Dividend | $138 | $115 |
| Federal Dividend Tax Credit | 15.0198% | 9.0301% |
| Ontario Dividend Tax Credit | 10% | 2.9863% |
| Combined Dividend Tax Credit | $34.52 | $13.81 |
Capital Gains
Capital gains represent the profit you incur when selling a capital property. This includes assets such as stocks, bonds, real estate, and business equipment.
- A capital gain occurs when you sell a capital property for more than you originally paid.
- A capital loss happens when you sell it for less than your purchase price.
Until sold, capital gains and losses remain unrealized—meaning they exist only on paper. Once the asset is sold, they become realized capital gains or losses, which have tax implications.
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. However, you can deduct RRSP contributions to reduce your income tax bracket.
For example, in the 2024 tax year, if you earn $80,000, you will be in the $55,867 to $111,733 federal tax bracket with a tax rate of 20.5%. This means that your income above $55,867 ($80,000 - $55,867) is taxed at a rate of 20.5%. Any additional income up to $111,733 will also be taxed at a rate of 20.5%. Any income beyond the $111,733 will be taxed at the next tax bracket rate of 26%.
At $80,000, you will also have income in the lower tax brackets of $0 to $55,867. Your income within this bracket will be taxed at a rate of 15%. However, your income up to $15,705 will be counted as the basic personal amount and will not be taxed. Thus, effectively, only the income between $15,705 and $55,867 will be taxed at a rate of 15%.
The basic personal amount, $15,705 for 2024, is adjusted every year. If your income is less than the basic personal amount, you will not have to pay any federal income tax. Different provinces also have different basic personal amounts.
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 earned $80,000 and lived in Ontario during 2023, your marginal tax rate will be 29.65%. If you earned an extra $1,000, you will have to pay an additional 29.65% of that amount in tax, or $296.50.
Disclaimer:
- Any analysis or commentary reflects the opinions of WOWA.ca analysts and should not be considered financial advice. Please consult a licensed professional before making any decisions.
- The calculators and content on this page are for general information only. WOWA does not guarantee the accuracy and is not responsible for any consequences of using the calculator.
- Financial institutions and brokerages may compensate us for connecting customers to them through payments for advertisements, clicks, and leads.
- Interest rates are sourced from financial institutions' websites or provided to us directly. Real estate data is sourced from the Canadian Real Estate Association (CREA) and regional boards' websites and documents.