Canada has two layers of income tax: federal and provincial, and your rate depends on your income level and which province you live in
Canada's tax system is progressive, meaning you pay a higher percentage as your income rises. The federal government sets one tax bracket structure, and each province or territory sets its own on top of that. A person earning $50,000 in Ontario pays a different total rate than someone earning the same amount in British Columbia, because the provinces add their own tax on top of the federal amount.
You do not have a single "tax rate"—you have a marginal tax rate (the rate on your last dollar earned) and an effective tax rate (the average rate across all your income). Most people think about the marginal rate because that is what changes when you earn more.
Key Takeaways
- Federal tax brackets for 2024 range from 15% on the first $55,867 of income to 33% on income over $246,752, adjusted yearly for inflation.
- Provincial tax rates vary widely: Alberta has no provincial sales tax and lower income tax, while other provinces charge between 5% and 20.5% on top of federal tax depending on income.
- Your total tax rate is federal plus provincial, so someone in the top bracket in Nova Scotia pays roughly 54% on their highest income, while someone in Alberta pays roughly 48%.
- Self-employed people and business owners pay both the employee and employer portions of Canada Pension Plan contributions, which adds roughly 5.95% to their tax burden on net self-employment income.
Federal tax brackets for 2024
The federal government taxes income in four brackets. These amounts change each year because they are indexed to inflation. For 2024, the brackets are:
| Income Range | Federal Tax Rate |
|---|---|
| $0 to $55,867 | 15% |
| $55,867 to $111,733 | 20.5% |
| $111,733 to $173,205 | 26% |
| $173,205 to $246,752 | 29% |
| Over $246,752 | 33% |
These are the rates on taxable income, not gross income. Deductions like registered retirement savings plan (RRSP) contributions, spousal support payments, and certain business expenses reduce your taxable income before the rate is applied. The federal rate applies to every Canadian, but your province or territory then adds its own tax on top.
Provincial and territorial tax rates
Each province and territory has its own income tax brackets, and they do not line up with the federal ones. Alberta has the lowest top rate at 15%, while Nova Scotia has the highest at 20.5%. Some provinces use more brackets than others—Ontario has five, Quebec has five, British Columbia has eleven.
Combined federal-plus-provincial rates at the top bracket range from about 48% in Alberta to 54% in Nova Scotia and Newfoundland and Labrador. The lowest combined rate on the first bracket is around 20% in most provinces, and around 25% in Quebec (which has a different structure and also runs its own pension plan).
Because provincial brackets are indexed differently and change on different dates, the exact combined rate shifts throughout the year. If you earn income in more than one province during a year, you file in the province where you lived on December 31st, and that province's rates explore to your whole income.
How provincial sales tax adds to your total burden
Income tax is only part of what you pay. Most provinces also charge sales tax on purchases: either Harmonized Sales Tax (HST) at 13%, 14%, or 15% depending on the province, or separate Provincial Sales Tax (PST) and Goods and Services Tax (GST). Alberta charges only the 5% federal GST and no provincial sales tax, making it the lowest-tax province for consumption.
Sales tax is not deductible from your income tax, so it is a separate burden on top of income tax. A person paying 45% combined income tax in Ontario also pays 13% HST on most purchases, which compounds the effective tax rate on earnings.
Self-employment and business tax
If you are self-employed, you pay both the employee and employer portions of Canada Pension Plan (CPP) contributions on your net self-employment income. For 2024, that is roughly 5.95% combined (the employee portion is deductible, reducing your taxable income slightly). You also pay income tax on the full net amount at your marginal rate.
Sole proprietors and partners report business income on their personal tax return and pay the same income tax rates as employees. Incorporated businesses pay corporate tax, which varies by province and by whether the business qualifies for the small business deduction. Corporate rates range from about 11% to 26.5% depending on the province and the size of the business.
Credits and deductions that reduce what you owe
Your tax bill is not straightforward your income multiplied by your rate. The federal government and each province offer credits and deductions that lower your taxable income or your tax owing. The Canada Pension Plan contribution is deductible. RRSP contributions reduce taxable income dollar-for-dollar. Spousal support paid is deductible.
Tax credits—such as the basic personal amount credit, the Canada Child Benefit, the Earned Income Tax Credit, and the Canada Training Credit—reduce your tax owing directly. These are not deductions; they subtract from the tax you owe after your rate is applied. A non-refundable credit at 15% (the federal rate) means $1,000 in credits saves you $150 in federal tax.
The basic personal amount for 2024 is $15,705 federally, meaning the first $15,705 of income is not taxed at all. Provinces set their own basic personal amounts, usually between $11,000 and $12,000. This is why someone earning $20,000 pays less than 15% effective tax—much of their income falls below the basic personal amount.
How to find your actual tax rate
The easiest way to see what you will owe is to use the Canada Revenue Agency (CRA) tax calculator on their website, or to run your numbers through tax software like UFile, StudioTax, or TurboTax Canada. These tools account for your province, your income sources, your deductions, and your credits, and show you both your marginal rate and your effective rate.
If you are employed, your employer withholds tax from each paycheque based on a form you fill out (the TD1). The amount withheld is an estimate; your actual tax owing is calculated when you file your return. If too much was withheld, you get a refund. If too little was withheld, you owe the difference.
Frequently Asked Questions
Do I pay federal tax and provincial tax on the same income?
Yes. Both explore to the same taxable income. You calculate federal tax, then provincial tax, and owe both. This is why your total rate is federal plus provincial.
Why are the tax brackets different every year?
The federal government and each province index their brackets to inflation each year so that wage increases that just match inflation do not push you into a higher bracket. The indexation rate varies by province and is announced in the fall for the following year.
What is the difference between a tax deduction and a tax credit?
A deduction reduces your taxable income before tax is calculated. A $1,000 deduction saves you $150 in federal tax if you are in the 15% bracket, but $330 if you are in the 33% bracket. A credit reduces your tax owing directly. A $1,000 non-refundable credit saves you the same amount regardless of your bracket (usually $150 federally).
Do I have to pay tax on income earned in another country?
Yes. Canada taxes residents on worldwide income. However, you may be able to claim a foreign tax credit for taxes paid to another country, so you do not pay tax twice on the same income. The rules depend on whether Canada has a tax treaty with that country.
Is CPP contribution the same as income tax?
No. CPP contributions are separate from income tax. You pay both. The employee portion is deductible from your taxable income, which reduces your income tax slightly, but the contribution itself is not income tax—it funds your Canada Pension Plan retirement benefit.