Canadian Income Tax Rates Explained

With tax season just around the corner, you may be starting to think about how much tax you’ll owe for the 2020 year. In this guide, we’ll take a look at Canada’s taxation system and the federal and provincial tax brackets.

What Type of Tax System Does Canada Have?

There are three types of tax systems: proportional taxes, regressive taxes and progressive taxes. A proportional tax system requires every taxpayer to pay the same percentage of their income, regardless of how much money they earn. This system is also referred to as flat tax and is quite simple to implement.

In a regressive tax system, high income earners pay a smaller fraction of taxes compared to low income taxpayers. The idea is that all individuals pay the same amount of tax regardless of how much they earn. The regressive system is rare in the modern world.

Finally, the progressive tax system requires high-income taxpayers to pay a larger percentage of their income compared to low-income taxpayers. The purpose of this tax system is to redistribute the wealth among people of low, middle and high class. The downfall of progressive tax systems is that they are more complicated. Canada uses the progressive tax system which is coincidentally the most commonly used taxation scheme today.

Income Tax Brackets (Federal & Provincial)

The first step when determining your tax payable amount is calculating your taxable income. The basic formula is summing all of your income earned between January 1 and December 31 of a taxation year. Then, subtract tax deductibles and eligible personal deductions to arrive at net income. If specific deductions apply, subtract those from your net income and you’ll arrive at your taxable income. For most individuals, net income and taxable income are the same amount.

Determining your taxable income is an important step because it governs what tax bracket you’re in and how much tax you’ll pay. A tax bracket is a series of taxable income ranges with corresponding tax rates. Canadians must pay tax federally and within their province and territory. You can find your respective federal and provincial tax bracket below.

Federal Income Taxes

  • 15% on the first $48,535 of taxable income, plus
  • 5% on the next $48,534 of taxable income, plus
  • 26% on the next $53,404 of taxable income, plus
  • 29% on the next $63,895 of taxable income, plus
  • 33% on taxable income over $214,368

Federal Tax Example

Ryan is a resident of Canada and has a taxable income of $105,000 for the 2020 taxation year.

$48,535 x 15% = $7,280.25

$48,534 x 20.5% = $9,949.47

$7,931 x 26% = $2,062.06

Ryan’s tax payable before tax credits is $19,291.78 ($7,280.25 + $9,949.47 + $2,062.06).

Provincial Income Tax Brackets

British Columbia Income Tax

  • 06% on the first $41,725, plus
  • 7% on taxable income between $41,725 to $83,451, plus
  • 5% on taxable income between $83,451 to $95,812, plus
  • 29% on taxable income between $95,812 to $116,344, plus
  • 7% on taxable income between $116,344 to $157,748, plus
  • 8% on taxable income between $157,748 to $220,000, plus
  • 5% on taxable income over $220,000

Alberta Income Tax

  • 10% on the first $131,220, plus
  • 12% on taxable income between $131,220 to $157,464, plus
  • 13% on taxable income between $157,464 to $209,952, plus
  • 14% on taxable income between $209,952 to $314,928, plus
  • 15% on taxable income over $314,928

Saskatchewan Income Tax

  • 5% on the first $45,225, plus
  • 5% on taxable income between $45,225 to $129,214, plus
  • 5% on taxable income over $129,214

Manitoba Income Tax

  • 8% on the first $33,389, plus
  • 75% on taxable income between $33,389 to $72,164, plus
  • 4% on taxable income over $72,164

Ontario Income Tax

  • 05% on the first $44,740, plus
  • 15% on taxable income between $44,740 to $89,482, plus
  • 16% on taxable income between $89,482 to $150,000, plus
  • 16% on taxable income between $150,000 to $220,000, plus
  • 16% on taxable income over $220,000

Quebec Income Tax

  • 15% on the first $44,545, plus
  • 20% on taxable income between $44,545 to $89,080, plus
  • 24% on taxable income between $89,080 to $108,390, plus
  • 75% on taxable income over $108,390

Newfoundland and Labrador Income Tax

  • 7% on the first $37,929, plus
  • 5% on taxable income between $37,929 to $75,858, plus
  • 8% on taxable income between $75,858 to $135,432, plus
  • 3% on taxable income between $135,432 to $189,604, plus
  • 3% on taxable income over $189,604

Nova Scotia Income Tax

  • 79% on the first $29,590, plus
  • 95% on taxable income between $29,590 to $59,180, plus
  • 67% on taxable income between $59,180 to $93,000, plus
  • 5% on taxable income between $93,000 to $150,000, plus
  • 21% on taxable income over $150,000

Prince Edward Island Income Tax

  • 8% on the first $31,984, plus
  • 8% on taxable income between $31,984 to $63,969, plus
  • 7% on taxable income over $63,969

New Brunswick Income Tax

  • 68% on the first $43,401, plus
  • 82% on taxable income between $43,401 to $86,803, plus
  • 52% on taxable income between $86,803 to $141,122, plus
  • 84% on taxable income between $141,122 to $160,776, plus
  • 3% on taxable income over $160,776

Yukon Income Tax

  • 4% on the first $48,535, plus
  • 9% on taxable income between $48,535 to $97,069, plus
  • 9% on taxable income between $97,069 to $150,473, plus
  • 89% on taxable income between $150,473 to $214,368, plus
  • 8% on taxable income between $214,368 to $500,000, plus
  • 15% on taxable income over $500,000

Nunavut Income Tax

  • 4% on the first $46,277, plus
  • 7% on taxable income between $46,277 to $92,555, plus
  • 9% on taxable income between $92,555 to $150,473, plus
  • 5% on taxable income over $150,473

Northwest Territories Income Tax

  • 9% on the first $43,957, plus
  • 6% on taxable income between $43,957 to $87,916, plus
  • 2% on taxable income between $87,916 to $142,932, plus
  • 05% on taxable income over $142,932

Provincial Tax Example

Ryan is a resident of Manitoba and has a taxable income of $105,000 for the 2020 taxation year.

$33,389 x 10.8% = $3,606.01

$38,775 x 12.75% = $4,943.81

$32,836 x 17.4% = $5,713.46

Ryan’s provincial tax payable before tax credits is $14,263.28 ($3,606.01 + $4,943.81 + $5,713.46).

Ryan’s combined tax payable before tax credits is $33,555.06 ($19,291.78 + $14,263.28).