CRA & Revenu Québec

An Overview of Canada’s Tax Brackets

Overview

  • Canadian income tax rates vary according to the amount of income you earn, and you pay different rates on different portions of your income.
  • Canada’s tax brackets reflect a marginal tax rate system.
  • The Canadian tax system is a progressive (or graduated) system which means low-income earners are taxed at a lower percentage than high-income earners; the more money you make, the more taxes you pay.

In tax-year 2020*, Canada’s Income Tax Brackets are:

  • 15% on the first $48,535 of taxable income, plus
  • 20.5% on the next $48,534 of taxable income (on the portion of taxable income over $48,535 up to $97,069), plus
  • 26% on the next $53,404 of taxable income (on the portion of taxable income over $97,069 up to $150,473), plus
  • 29% on the next $63,895 of taxable income (on the portion of taxable income over $150,473 up to $214,368), plus
  • 33% of taxable income over $214,368

The tax rates, also known as tax brackets, apply to personal income earned between predetermined minimum and maximum amounts. By understanding where your income falls within the tax brackets can help you make decisions about when and how to claim certain deductions and credits.

By understanding what tax bracket you are currently in, it can also help you understand changes in your income taxes if, for example, you start a side-gig or have other extra income that pushes you into the next bracket.

When you’re preparing your income taxes this year, this could explain why your taxes owing or refund amount are different than what they were last year.

The applicable rates are listed below for the current tax year. It is important to note that these rates apply to taxable income, which is your gross income less any deductions you may be entitled to.

Remember, all provinces and territories also have their own tax brackets. When using the tax brackets and your annual earnings to make contribution decisions, make sure to also consider the tax rates for the province where you reside.

Last Year’s Tax Rates

In tax-year 2019*, Canada’s Income Tax Brackets were:

  • 15% on the first $47,630 of taxable income, plus
  • 20.5% on the next $47,629 of taxable income (on the portion of taxable income over 47,630 up to $95,259), plus
  • 26% on the next $52,408 of taxable income (on the portion of taxable income over $95,259 up to $147,667), plus
  • 29% on the next $62,704 of taxable income (on the portion of taxable income over 147,667 up to $210,371), plus
  • 33% of taxable income over $210,371

It’s important to note the CRA changes income tax rates periodically, but it publishes current (and historical) rates on its website for both federal and provincial taxes.  For years, 2018 and older, click on this link for both federal and provincial rates.

Understanding how Canada’s Tax Brackets work

If your taxable income is less than the $47,630 threshold you pay 15 percent tax on all of it. For example, if your taxable income (after claiming your deductions and amounts) is $30,000, the CRA requires you to pay $4,500 in income tax.

However, if your income is $200,000, you face several tax rates:

  • In 2019, the first $47,630 you earn is taxed at 15 percent, resulting in a tax bill of $7,144.50.
  • The next $47,629 you earn is taxed at 20.5 percent, while the following $52,408 is taxed at 26 percent. These tax brackets add $9,763.94 and $13,626.08 respectively, bringing your tax bill to $30,534.52
  • At this point, $147,667 of your income has been taxed. The final bracket for your remaining income is taxed at a rate of 29 percent on your remaining $52,333 of your 200,000 income. This adds $15,176.57 to your tax bill, bringing your total tax due for the year to $45,712.09

If you earn more than $214,368 in taxable income in 2020, the portion over $214,368 is taxed at a rate of 33%

In Canada, taxpayers pay income tax to the federal government and to the government of the province/territory where they reside. In all provinces/territories, except Québec, the federal government collects the provincial/territorial tax and gives it back to them in the form of various programs. Québec collects and manages its own income tax.

 

*The 2019 tax year brackets impacted your earnings in 2019, and will be how you are taxed on your 2019 tax return.  The 2020 tax year brackets are effective January 1, 2020 and impact how you might be taxed on your earnings throughout the year, and when you file your taxes next year, in 2021