Understanding Canadian Income Tax Brackets

With 2022 tax returns due shortly, many Canadians are now starting to plan and file their taxes. Whether you are opting to self-file or have an accountant assist in the process, it is imperative to know your income for the past year, as it will impact the amount of taxes you have to pay.

Federal and Provincial Tax Brackets

In Canada, the income tax you pay varies depending on how much you made. Income tax in Canada is calculated on a scaling system, meaning your money is taxed at a higher rate when it goes up a tax bracket. In 2023, the tax brackets are as follows:

• 15% up to $53,359 of taxable income.
• 20.5% between $53,359 and $106,717.
• 26% between $106,717 and $165,430.
• 29% between $165,430 to $235,675.
• 33% on any amount of taxable income exceeding $235,675.

Here is how you could calculate the federal taxes you owe - if you made $65,000 last year, $53,359 is taxed at 15%, and the remaining $11,641 is taxed at the 20.5% tax bracket. 

However, paying the federal tax alone is not enough, as there are also provincial tax brackets. Each province has separate tax rates from the aforementioned federal tax rate. In British Columbia, for example, the income tax brackets are: 

• 5.06% up to $45,654 of taxable income.
• 7.7% between $45,654 and $91,310.
• 10.5% between $91,310 and $104,835.
• 12.29% between $104,835 and $127,299.
• 14.7% between $127,299 and $172,602.
• 16.8% on any amount exceeding $172,602 and $240,716.
• 20.5% on any taxable income exceeding $240,716.

You can use the same calculation as above to determine your provincial tax.

To determine your total income tax owed for last year, you must calculate your federal tax and provincial tax owed and then add the two together.

Understanding Canadian income tax brackets can be a bit complex, and there are several ways that you can minimize your taxable income to lower your tax bracket. HWGCA is happy to help Canadians file accurate and stress-free personal and business taxes. If you need assistance, contact us today.

Located in Surrey (Cloverdale), British Columbia, since 1971, HWG, Chartered Professional Accountants proudly helps clients throughout the Lower Mainland and across Canada.

Our team of chartered professional accountants provides helpful business and personal tax services. Our continued growth proves the success of our client relationships.