9.2.4 Tax brackets and rates

From: Financial Consumer Agency of Canada

Once you have identified what your income is, you need to know what percentage you'll pay as income tax. People with a lower income pay a lower tax rate than people with a higher income. This is known as a graduated income tax system. 

Federal income tax

Your income falls into one of four income tax brackets (or segments). The tax bracket is based on your taxable income—that is, your total income minus allowable deductions and exemptions, as discussed in the section titled Reducing your taxes.

Each bracket pays a different rate of tax, as the table below shows:

Federal income tax
2017 Federal income tax brackets* 2017 Federal income tax rates

$45,916 or less

15%

$45,916 to $91,831

20.5%

$91,831 to $142,353

26%

$142,353 to $202,800 29%

More than $202,800

33%

* These amounts are adjusted for inflation and other factors in each tax year.

Refer to Page 2 of Canada Revenue Agency T1 General – Schedule 1 for Non-Residents and Deemed Residents of Canada. How would your income fit the calculations?

Step 2-Federal tax on taxable income. See description in Federal income tax table above.

 

Example: If your taxable income was $50,000 in 2017, you would calculate your federal tax as follows:

  • Pay 15% on the amount up to $45,916, or $6,887
  • Pay 20.5% on the amount between $45,916 to $91,831 or $837.22
  • Total federal tax payable: $7,724.22.

This is how the calculation looks on Page 2 of Canada Revenue Agency fillable/saveable T1 General – Schedule 1 for Non-Residents and Deemed Residents of Canada.

Step 2 - Federal tax on taxable income form if your taxable income was $50,000 in 2016. See description above.

 

On $50,000 taxable income, the average federal tax rate is 15.45 percent —that's the total tax you pay divided by your total income:

  • Average tax rate = total taxes paid / total taxable income

However, your marginal federal tax rate is 20.5 percent—that's the tax rate you pay on anything you earn beyond your current earnings. It applies until you make more than $91,831, when your marginal rate rises to 26 percent. The marginal federal tax rate is 26 percent until you make more than $142,353, when your marginal rate rises to 29%. After $202,800, your marginal rate is 33 percent.

Quebec income tax

Each province and territory also charges income tax in addition to the federal income tax. Their rates and tax brackets vary.

The chart below shows Quebec's tax rates for 2016.

Quebec income tax
2017 Quebec income tax brackets * 2017 Quebec income tax rate

$42,705 or less

15%

$42,705 to $85,405

20%

$85,405 to $103,915

24%

More than $103,915

25.75%

* These amounts are adjusted for inflation and other factors in each tax year.

Refer to Work Chart 401 of Agence du Revenu du Québec’s TP-1.D.GR-V document (PDF). How would your income fit the calculations?

Work chart 401 from TP-1.D.GR-V document. See description in the Quebec income tax table above.

The tax brackets and rates can change in every provincial budget. For details, go to the Agence du Revenu du Québec information on Income Tax Rates. For details on current federal rates, go to Canada Revenue Agency's information on All Rates.

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