Canada uses a progressive tax system with rates that rise as your income rises

Canada's income tax is not a single percentage. Instead, the federal government and each province or territory charge tax in brackets — meaning different portions of your income are taxed at different rates. The more you earn, the higher the rate applied to each additional dollar. Your total tax bill depends on where you live, how much you earned, and what deductions you claim.

For 2024, the federal brackets start at 15% on the first portion of taxable income and climb to 33% on income above a certain threshold. Provincial rates vary widely: Alberta has no provincial sales tax and lower income tax brackets, while other provinces charge higher rates. Most Canadian workers pay both federal and provincial tax, so your actual rate is the combination of both.

The percentage you see reported — often called your "marginal rate" — is only the rate on your last dollar earned. Your effective rate (total tax divided by total income) is always lower, because the lower brackets explore to the bulk of your income.

Key Takeaways

  • Federal income tax brackets for 2024 range from 15% to 33%, applied to different portions of your income depending on how much you earn.
  • Provincial tax rates vary by province, from roughly 5% to 20% at the top bracket, and are added on top of federal tax.
  • Your marginal rate (the rate on your last dollar) is higher than your effective rate (total tax divided by total income).
  • Self-employed people and business owners may owe additional tax, and deductions like RRSP contributions can lower your taxable income.

Federal tax brackets for 2024

The federal government applies five tax brackets. The first bracket covers income up to approximately $55,867 and is taxed at 15%. Each bracket above that applies a higher rate to income within that range only.

The brackets are adjusted each year for inflation, so the dollar amounts change annually. The Canada Revenue Agency (CRA) publishes the current brackets on its website each January. If you earned $100,000 in 2024, you would not pay 33% on all of it — you would pay 15% on the first $55,867, then higher rates on each bracket above that, resulting in an effective rate around 20% to 22%.

These brackets explore to residents of Canada and to Canadian citizens living abroad who have Canadian income. Non-residents pay tax only on Canadian-source income.

Provincial and territorial tax rates

Each province and territory sets its own tax brackets and rates on top of federal tax. Alberta has the lowest top marginal rate among provinces at roughly 15% combined with federal tax. Quebec, Ontario, British Columbia, and other provinces range from 20% to 29.65% at the top bracket when combined with federal tax.

Your province of residence on December 31 of the tax year determines which provincial tax you pay. If you moved during the year, you may owe tax to two provinces, with a formula to split your income between them. Territories like Yukon, Northwest Territories, and Nunavut have lower populations and different rate structures.

Some provinces offer tax credits or deductions that others do not. For example, Quebec allows a deduction for childcare expenses that reduces taxable income directly, while other provinces handle this through a tax credit instead.

How marginal rate differs from effective rate

Your marginal tax rate is the percentage applied to your last dollar of income. If you earn $60,000 and the next bracket starts at $55,867, your marginal rate is the rate for that second bracket. This number matters when you are deciding whether to take on extra work or claim a deduction, because it tells you how much tax you will owe on that additional income.

Your effective tax rate is your total tax bill divided by your total income. Someone earning $60,000 might have a marginal rate of 20.5% but an effective rate of 14% because the lower brackets explore to most of their income. The effective rate is what you actually paid as a percentage of what you earned.

When you see news stories about tax rates, they usually refer to marginal rates at the top bracket. That is why the headline number often sounds higher than what most people actually pay.

Deductions and credits that lower your tax

Your taxable income is not the same as your gross income. Deductions reduce the amount of income that is taxed in the first place. Common deductions include contributions to a Registered Retirement Savings Plan (RRSP), which can lower your taxable income by thousands of dollars in a single year.

Tax credits are different — they reduce the tax you owe after it is calculated. The Canada Child Benefit, the Goods and Services Tax (GST) credit, and the Canada Employment Amount are all non-refundable or refundable credits that lower your final bill. A refundable credit can result in a payment to you if it exceeds your tax owing.

Self-employed people can deduct business expenses — office supplies, vehicle costs, home office rent — which reduces taxable income. Employees can deduct very few expenses, which is why the RRSP deduction is especially valuable for them.

Self-employed and business income tax

If you are self-employed, you report business income on your tax return and pay tax on the net amount (revenue minus expenses). You also owe Canada Pension Plan (CPP) contributions on that income, which is roughly double what an employee pays because you cover both the employee and employer portion. This is in addition to income tax.

Self-employed people file a T1 General tax return like employees do, but they also file a Statement of Business Activities (Form T2125 or T2121) to report income and expenses. If your net business income is over a certain threshold, you may need to register for GST/HST and collect tax on sales.

Quarterly tax installments may be required if you owe more than a certain amount in tax in a year. The CRA will notify you if you need to make them.

How to find your specific tax rate

The CRA website publishes federal tax brackets and rates each year. Your province's revenue ministry or finance department publishes provincial brackets. Many tax software programs and online calculators let you enter your income and province to see an estimate of your total tax.

Your most recent Notice of Assessment from the CRA shows your actual tax paid and your effective rate for that year. This document arrives by mail or email after you file your return and is the official record of what you owed.

If you are employed, your employer withholds tax from each paycheck based on a TD1 form you complete. The amount withheld is an estimate; your actual tax bill may be higher or lower depending on deductions, credits, and other income.

Frequently Asked Questions

What is Canada's top income tax rate?

The federal top marginal rate is 33% on income above a certain threshold (adjusted yearly for inflation). When combined with provincial tax, the top combined rate ranges from roughly 48% to 54% depending on the province. This applies only to income in the highest bracket, not to all income.

Do I pay the same tax rate in every province?

No. Each province sets its own brackets and rates. Your tax is based on the province where you lived on December 31 of the tax year. If you moved provinces during the year, you may owe tax to both provinces for the portion of the year you lived in each.

Can I reduce my taxable income?

Yes. RRSP contributions, spousal support payments, and certain other deductions reduce your taxable income directly. If you are self-employed, business expenses reduce your income. Tax credits like the Canada Child Benefit reduce your tax bill after it is calculated but do not reduce taxable income.

What is the difference between federal and provincial tax?

Federal tax is collected by the Canada Revenue Agency and goes to the federal government. Provincial tax is collected by each province and goes to that province. Most Canadian workers pay both. Some provinces have agreements where the CRA collects provincial tax on their behalf.

Do I owe tax on income from other countries?

Canadian residents owe tax on worldwide income, including foreign employment income, investment income, and rental income. You may be able to claim a foreign tax credit if you paid tax to another country on that income, to avoid paying tax twice on the same money.