The Canada Revenue Agency (CRA) collects income tax from working Canadians each calendar year (in Canada, the calendar year runs from January 1 to December 31). Taxes are normally due on April 30 following a tax year.
Canada operates a marginal tax rate. A marginal tax taxes individuals based upon their earnings bracket, with low-income earners being taxed at a much lower rate than higher-income earners. As you move up in the tax bracket, you pay more taxes.
Canada operates a combined income tax rate, meaning individuals pay both federal and provincial income taxes. However, the CRA, a federal government agency, handles the receipt of all income taxes on behalf of the provinces and the Government of Canada, so taxpayers only have to pay income tax directly to one source.
Canada has one of the highest combined income tax rates in the industrialized world. In most provinces, the combined income tax rate in Canada is higher than its neighbours to the south:
Out of 61 Canadian and US jurisdictions (including the provinces, states, and Washington, DC), Nova Scotia currently has the highest combined top statutory marginal rate (54.00 percent), followed by Ontario (53.53 percent), and Quebec (53.31 percent).
Canada’s Rising Personal Tax Rates and Falling Tax Competitiveness, July 7, 2020 (link)
2020 Income Tax Tables In Canada
As discussed above, in Canada, individuals have to pay federal income tax and provincial income tax. The federal marginal income tax rates are the same for every individual in Canada. However, provincial income tax rates vary from province to province (Nova Scotia has the highest income tax rate while Alberta has the lowest income tax rate).
2020 Federal Income Tax Brackets/Rates In Canada
The federal income tax brackets and rates for Canadians for this year (2020) and next year (2021) are listed below.
| Income thresholds | Federal Marginal Tax Rate | Tax payable on this income |
|---|---|---|
| $0 – $48,535 | 15% | 15 cents for each dollar earned |
| $48,535 to $97,069 | 20.5% | 20.5 cents for each $1 earned over $48,535 to $97,069 |
| $97,069 up to $150,473 | 26% | 26 cents for each $1 earned over $97,069 up to $150,473 |
| $150,473 up to $214,368 | 29% | 29 cents for each $1 earned over $150,473 up to $214,36 |
| $214,368 and over | 33% | 33 cents for each $1 earned over $214,368 |
2020 Provincial Income Tax Brackets/RatesRates In Canada
The provincial income tax brackets and rates for Canadians for this year (2020) and next year (2021) are listed below.
| Province | Provincial Marginal Tax Rate |
| Newfoundland and Labrador | 8.7% on the first $37,591 of income, + 14.5% on the next $37,590, + 15.8% on the next $59,043, + 17.3% on the next $53,689, + 18.3% on the amount over $187,913 |
| Prince Edward Island | 9.8% on the first $31,984 of income, + 13.8% on the next $31,985, + 16.7% on the amount over $63,969 |
| Nova Scotia | 8.79% on the first $29,590 of income, + 14.95% on the next $29,590, + 16.67% on the next $33,820, + 17.5% on the next $57,000, + 21% on the amount over $150,000 |
| New Brunswick | 9.68% on the first $42,592 of income, + 14.82% on the next $42,592, + 16.52% on the next $53,307, + 17.84% on the next $19,287, + 20.3% on the amount over $157,778 |
| Quebec | 15% on the first $43,790 of income, + 20% on the next $43,785, + 24% on the next $18,980, + 25.75% on the amount over $106,555 |
| Ontario | 5.05% on the first $43,906 of income, + 9.15% on the next $43,907, + 11.16% on the next $62,187, + 12.16% on the next $70,000, + 13.16 % on the amount over $220,000 |
| Manitoba | 10.8% on the first $32,670 of income, + 12.75% on the next $37,940, + 17.4% on the amount over $70,610 |
| Saskatchewan | 10.5% on the first $45,225 of income, + 12.5% on the next $83,989, + 14.5% on the amount over $129,214 |
| Alberta | 10% on the first $131,220 of income, + 12% on the next $26,244, + 13% on the next $52,488, + 14% on the next $104,976, + 15% on the amount over $314,928 |
| British Columbia | 5.06% on the first $40,707 of income, + 7.7% on the next $40,709, + 10.5% on the next $12,060, + 12.29% on the next $20,030, + 14.7% on the next $40,394, + 16.8% on the amount over $153,900 |
| Yukon | 6.4% on the first $47,630 of income, + 9% on the next $47,629, + 10.9% on the next $52,408, + 12.8% on the next $352,333, + 15% on the amount over $500,000 |
| Northwest Territories | 5.9% on the first $43,137 of income, + 8.6% on the next $43,140, + 12.2% on the next $53,990, + 14.05% on the amount over $140,267 |
| Nunavut | 4% on the first $45,414 of income, + 7% on the next $45,415, + 9% on the next $56,838, + 11.5% on the amount over $147,667 |
2020 Combined Income Tax Brackets/Rates Canada
To count up how much income taxes an individual in Canada owes the CRA, they have to add their federal and provincial marginal tax rates together. Below are the combined income federal and provincial tax brackets/rates for Ontario and BC, Canada’s most populous provinces.
Ontario
| Income thresholds | Combined Marginal Tax Rate |
| $0 – $10,783 | 0% |
| $10,784 – $12,298 | 5.05% |
| $12,299 – $44,740 | 20.05% |
| $44,741 – $48,535 | 24.15% |
| $48,536 – $78,783 | 29.65% |
| $78,784 – $89,482 | 31.48% |
| $89,483 – $92,825 | 33.89% |
| $92,826 – $97,069 | 37.91% |
| $97,070 – $150,000 | 43.41% |
| $150,001 – $150,473 | 44.97% |
| $150,474 – $214,368 | 47.97% |
| $214,369 – $220,000 | 51.97% |
| Over $220,000 | 53.53% |
British Columbia
| Income thresholds | Combined Tax Rate |
| $0 – $10,949 | 0% |
| $10,950 – $12,298 | 5.06% |
| $12,299 – $41,725 | 20.06% |
| $41,726 – $48,535 | 22.70% |
| $48,536 – $83,451 | 28.20% |
| $83,452 – $95,812 | 31.00% |
| $95,813 – $97,069 | 32.79% |
| $97,070 – $116,344 | 38.29% |
| $116,345 – $150,473 | 40.70% |
| $150,474 – $157,748 | 43.70% |
| $157,749 – $214,368 | 45.80% |
| over $214,368 | 49.80% |
Example Individual Income Tax Payable in Canada
Sarah earns $100,000 per year. She lives in Toronto. Sarah will be taxed by the Federal and Ontario Governments. Canada and Ontario have marginal tax rates, so Sarah’s earnings will be taxed at a higher rate as she progresses up the income tax brackets (see tables above). To that end, Sarah will owe $15,240 in federal income tax and $8,139 in provincial tax or $27,133 in total to the CRA at the end of the year. Sarah’s average marginal tax rate is 27.13%.
There are various ways to minimize income taxes in Canada, mostly through income deductions, moving your earnings into an RRSP or TFSA or other tax credits. Speak to a tax planner or use tax software like TurboTax or SimpleTax to calculate your income tax and learn about ways to minimize your tax bill.
Jeff is a lawyer in Toronto who works for a technology startup. Jeff is a frequent lecturer on employment law and is the author of an employment law textbook and various trade journal articles. Jeff is interested in Canadian business, technology and law, and this blog is his platform to share his views and tips in those areas.