Understanding Canada’s Individual Income Tax Brackets - A Guide For Taxpayers
Are you unsure about how your income is taxed? Do you want to understand a bit more about how the personal tax system works in Canada? If so, this article is for you. Enjoy!
What are income tax brackets?
Income tax brackets are part of a “progressive” tax system - basically, a system that is supposed to determine how much tax you pay per year depending on the amount of income you earn. The general idea behind the system is that the more you earn, the more you can afford to pay, and the rate at which you pay increases with your earnings.
You are required to pay income taxes to both the federal and the provincial governments. However, the federal and provincial governments each have different tax rates and different specific brackets that change each year. This makes it very difficult to understand how much tax you are really paying.
Below we provide some simple summary tables to help you understand how both federal and provincial income tax brackets work in Canada.
Please remember that these tables are calculated based on “taxable income”. The calculation of taxable income is very complex, and different types of income have different “inclusion rates”; in addition, deductions and credits lower your taxable income and tax payable respectively. Keep an eye out for different Community articles that explore some of these issues!
Federal Tax Bracket Rates and Income Thresholds in Canada - 2024
Below is a chart that shows the federal tax rate for the corresponding taxable income threshold in Canada for 2024.
We believe that every individual taxpayer in Canada should understand this.
Tax Rate | Taxable Income Threshold |
15% | Taxable Income up to $55,867 |
20.5% | Portion of Taxable Income from $55,867 to $111,733 |
26% | Portion of Taxable Income from $111,733 to $173,205 |
29% | Portion of Taxable Income from $173,205 to $246,752 |
33% | Portion of Taxable Income that exceeds $246,752 |
The tax rate is the percentage of taxable income that is payable as income tax.
So, the more money you earn, the higher the tax rate.
Provincial Tax Bracket Rates and Income Thresholds in Canada - 2024
Each province or territory has their own tax rates and brackets. You are only affected by the tax rates of the province that you live in on December 31 (for self-employed people, you may need to pay tax to multiple provinces, depending on where you earn your income).
Here is an example of the tax bracket chart for Ontario in 2024 (keep an eye out for our rate charts in another Community article):
Ontario 2024 Chart
Tax Rate | Taxable Income Threshold |
5.05% | Taxable Income up to $51,446 |
9.15% | Portion of Taxable Income from $51,446 to $102,894 |
11.16% | Portion of Taxable Income from $102,894 to $150,000 |
12.16% | Portion of Taxable Income from $150,000 to $220,000 |
13.16% | Portion of Taxable Income that exceeds $220,000 |
Tax Deductibility and Credits
It is important to know your specific eligibility for all the possible credits and deductions that may apply to you. These can include items like self-employment expenses, employee expenses, home office expenses, moving expenses, RRSP deductions, charitable contributions, and many other possibilities.
How to Calculate Taxable Income - Living in Ontario
Let’s say you live in Ontario, and you have a taxable income of $255,000 in 2024, after all possible deductions and exemptions.
How to calculate your Federal Tax Liability
Bracket explanation | Calculation | Tax Payable |
The tax rate for taxable income up to $55,867 is 15%. | $55,867 x 0.15 = $8,380.05 | $8,380.05 |
The Tax Rate for the portion of taxable income from $55,867 to $111,733 is 20.5%. | $111,733 - $55,867= $55,866 $55,866 x 0.205 = $11,452.53 | $11,452.53 |
The Tax Rate for the portion of taxable income from $111,733 to $173,205 is 26%. | $173,205 - $111,733 = $61,472 $61,472 x 0.26 = $15,982.72 | $15,982.72 |
The Tax Rate for the portion of taxable income from $173,205 to $246,752 is 29%. | $246,752 - $173,205 = $73,547 $73,547 x 0.29 = $21,328.63 | $21,328.63 |
The Tax Rate for the portion of taxable income that exceeds $246,752 is 33%. | $255,000 - $246,752 = $8,248 $8,248 x 0.33 = $2,721.84 | $2,721.84 |
Total Federal Tax Bill is $8,380.05 + $11,452.53 + $15,982.72 + $21,328.63 + $2,721.84 = $59,865.77
This would be your federal income tax payable, regardless of where you live in Canada, if you earned $255,000 in taxable income in 2024.
How to calculate your Ontario Tax Liability
Explanation | Calculation | Tax Bill |
The Tax Rate for taxable income up to $51,446 is 5.05%. | $51,446 x 0.0505 = $2,598.023 | $2,598.02 |
The Tax Rate for the portion of taxable income from $51,446 to $102,894 is 9.15%. | $102,894 - $51,446 = $51,448 $51,448 x 0.0915 = $4707.492 | $4,707.49 |
The Tax Rate for the portion of taxable income from $102,894 to $150,000 is 11.16%. | $150,000 - $102,894 = $47,106 $47,106 x 0.1116 = $5,257.03 | $5,257.03 |
The Tax Rate for the portion of taxable income from $150,000 to $220,000 is 12.16%. | $220,000 - $150,000 = $70,000 $70,000 x 0.1216 = $8,512.00 | $8,512.00 |
The Tax Rate for the portion of taxable income that exceeds $220,000 is 13.16% | $255,000 - $220,000 = $35,000 $35,000 x 0.1316 = $4,606.00 | $4,606.00 |
Total Provincial Income Tax Payable is $2,598.02 + $4,707.49 + $5,257.03 + $8,512 + $4,606 = $25,680.554
This would be the provincial income tax payable in Ontario if you earned $255,000 in taxable income in 2024.
Note that, for simplicity, this does NOT include items such as the Ontario surtax.
Our tax calculator, coming soon on our Balance App, will take this one step further, and include items such as this. Stay tuned!!
What is my final tax payable?
Drumroll please ….
Your total income tax payable = Federal Tax Payable + Ontario Tax Payable
$25,680.55 + $59,865.77 = $85,546.32.
Therefore, if you earned $255,000 in Ontario in 2024, you would be paying $85,546.32 in total basic income tax, before surtaxes and credits.
Important Note
This is an example only. It is intended to show you how the tax brackets and rates work. This is not accurate as it does not include deductions and surtaxes such as CPP and EI deductions, the Ontario surtax, etc. which are all dependent on YOUR specific facts and circumstances.
Marital Status
In Canada, regardless of Marital Status, everyone is required to file their own individual tax return. However, Marital Status impacts many calculations, credits and benefits, and allows for the transfer of certain unused credits and amounts between spouses.
Optimization of tax payable as a family unit is a real thing - ask us how that works!
Are you looking for additional information about personal tax brackets? Are you looking for someone to help ensure that you claim all of the credits and deductions that you’re entitled to?
Book a free consult here.
Comments