Personal Income Tax Rates & Tax Brackets In Canada 2024
Reviewed by Randolph Vialva, MBA
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Did you know that according to World Bank data, the total tax revenue of Canada contributes to 13% of the country’s total GDP? A significant portion of Canada’s total tax is personal income taxes from individuals whose annual income is within the tax brackets.
Tax filing season is upon us, and one of the most important things to consider is your income tax rate for this tax year. If you’re a Canadian resident who earns an income, it’s essential to understand how much of that money goes towards taxes.
This article will take an in-depth look at the Personal Income Tax Rates & Tax Brackets in Canada in the 2024 tax year and review some of the best Canadian tax software available today.
What Is Personal Income Tax In Canada?
Personal income tax in Canada is based on the total amount of money an individual earns during a given year. It’s important to note that there are different types of taxes, such as provincial and federal.
The Federal government collects taxes from all Canadians, regardless of where they live, while the Provincial governments collect taxes from citizens who reside in their respective provinces or territories.
Personal income tax rates also vary based on how much you earn within a specific range. These ranges are known as ‘tax brackets,’ and they help determine what rate will be applied to your taxable income based on how much money you make each year.
How Does Canada’s Personal Income Tax Brackets Work?
Both provincial and federal taxation authorities follow the progressive taxation method when collecting taxes. Progressive taxation implies that the more money you make, the higher your taxes will be.
This means that if you’re a high-income earner, you’ll have to pay a much higher rate than someone who earns less. This is because as your income increases, so does the percentage of taxes you’re required to pay.
Tax brackets save individuals from paying a flat income tax rate, which would be unfair and burdensome for low-income individuals.
Personal Income Tax Brackets & Tax Rates In Canada
Currently, the Canada Revenue Agency (CRA) uses five different tax brackets with marginal rates ranging from 15% to 33%. Each bracket applies its tax rate, which helps determine how much tax an individual pays yearly.
In addition, each province and territory has its tax brackets and personal income tax rates, which can vary from the federal income tax. Federal and provincial governments review the personal income tax rates and brackets periodically, which you can study in this Federal tax rate and calculation chart.
Federal Tax Brackets
The current Federal tax rates and brackets for 2024 in Canada are as follows:
- First $50,197 of taxable annual income: 15%
- Next $50,195 of taxable annual income: 20.5%
- Next $55,233 of taxable annual income: 26%
- Next $66,083 of taxable annual income: 29$
- The portion of taxable annual income above $221,708: 33%
Provincial Tax Brackets
The current provincial tax rates and brackets for 2024 in Canada vary from province to province. Here are a few provincial tax brackets rates for British Columbia, Prince Edward Island, and Nova Scotia.
British Columbia
- 5.06% for taxable income up to $43,070
- 7.7% for the taxable income between $43,070 and $86,141
- 10.5% for taxable income between $86,141 and $98,901
In addition, British Columbia has four more income tax brackets. If you earn over $98,901, your provincial tax rate may range from 12.29% to 20.5%.
Prince Edward Island
This small province has three provincial tax brackets.
- 9.8% tax for income up to $31,984
- 13.8% tax for income within the bracket of $31,984 to $63,969
- 16.7% tax for a portion of the income above $63,969
Nova Scotia
There are five different tax brackets ranging from 8.79% to 21%.
- 8.79% tax for taxable income up to $29,590
- 14.95% tax for taxable income that falls within the tax bracket of $29,590 to $59,180
How Do Canada’s Personal Income Tax Rates Work?
Canadian income tax rates depend on the tax brackets you fall into. Each bracket has a different tax rate that is applied to your income based on the amount you make.
Here’s an example: If your annual income is $87,500, and you want to determine your federal income tax, then you can see that your income falls in the first two federal tax brackets.
So for the first $50,197 of your income, your tax rate will be 15%. For the remaining portion, or $37,303, your tax rate will be 20.5%. Note that this is the federal tax rate only. You will also have to consider the provincial tax rate or provincial income taxes on top of the federal income tax.
How To Calculate Canada Personal Tax Rate?
To calculate your personal tax rate in Canada, you will first need to know your taxable annual income and where it falls within the different tax brackets for federal and provincial rates. The taxable annual income is not your total income because you can get deductions for certain expenses.
You then need to determine if you are a resident of a province or territory, which is essential for calculating provincial taxes. Note that your final tax rate will be the combined federal and provincial taxes.
Once you have all this information, you can use online tools such as TurboTax, one of the best Canadian tax software tools available today. These tools can help make calculating your personal tax rate quick and easy.
Taxable Income & How To Get A Lower Tax Brackets Rate
In order to get a lower tax bracket rate, it’s important to understand what taxable income is. Taxable income is the amount of your total income that is eligible for taxation.
- Employment Income
- Investment income, interest income, and capital gains
- Pension and other sources of retirement income
- Income from dividends, apart from a few exceptions
- Self-employment Income
- Income from businesses
Often, you may use certain deductions from your total income to reduce your taxable income and lower your tax bracket rate.
The most common deductions are work-related expenses such as travel, medical, childcare, etc. Other deductions, such as charitable donations or spousal support payments, can help you reduce your taxable income and thus get a lower personal tax rate.
Another tax-deductible income category worth mentioning is the dividend tax credits. You may be eligible for a dividend tax credit if you receive foreign dividends. This non-refundable tax credit reduces your taxable income and lowers your overall personal income tax amount.
5 Best Canada Tax Software 2024
We have extensively tested several top Canada tax software for 2024, and here are our top picks for you:
- TurboTax: Best Overall
- SimpleTax: Most Affordable
- Wealthsimple Tax: Most User-friendly
- H&R Block: Most Complete Solution for DIY Tax Filing
- StudioTax: Most Suitable for Small Groups of Individuals
5 Best Canada Tax Software April 2024
TurboTax
TurboTax tops our list as the best software in Canada for personal income tax calculation and filing. Intuit acquired TurboTax in 1993 and has been working hard to make it one of the most comprehensive tax software packages.
- Free assisted tax filing with accurate identification of tax deductions
- Real-time tax filing consultation from experts
- Guaranteed tax calculation accuracy
- May occasionally miss deductions
- May take a while to learn for a beginner
TurboTax lets you file taxes both by your own and by obtaining professional support and consultation. TurboTax guarantees a 100% refund if there is any mistake in your income tax calculation that does not fully comply with the CRA or if you find an alternative minimum tax less than what Turbotax calculated. TurboTax’s legal consultants will still have you covered even if you miss your CRA tax filing deadlines.
One of the areas where TurboTax stands out is the CRA return auto-filing, which drastically reduces both your potential for error and your stress levels. Even if you do all of your tax filings yourself, you can still validate your file preparation with a TurboTax legal expert on short notice. Experts will review every detail you have entered in your tax file.
SimpleTax
SimpleTax is a fully online and cloud-hosted tax software compatible with various platforms and lets you effortlessly prepare your CRA tax files. The tool is always accessible on the go and suitable for both individuals and income tax professionals.
- Multi-platform compatibility
- Options to choose from various banking products
- Software installation and use support through certified technicians
- Limited support with consultation and file preparation
- Security issues due to fully cloud-based implementation
SimpleTax has been in the industry for over 50 years and helped thousands of tax professionals in Canada prepare taxes for their clients. SimpleTax also offers dedicated account managers. These single points of contact remain in touch with clients throughout the years to respond to any queries related to federal or provincial tax bills.
Being an online solution, SimpleTax provides plenty of conveniences, including paperless tax file preparation, individual client portal management, mobile app, and remote signature management.
One of the unique features of SimpleTax is the instant credit program that lets you obtain a useful and quick credit line from the company as a regular customer. You can use the credit amount to cover your business expenses or develop new business features like a website or client management app.
Wealthsimple Tax
Wealthsimple is one of the best personal income tax filing software tools in Canada for budget-conscious individuals looking for premium service in a free-of-cost package. You will easily get premium features like NETFILE certified tax filing, auto-fill, and optimization for RRSP contributions.
- Quick business formation services
- One year registered agent service for all packages
- Helpful dashboard for new users
- Variety of additional features
- Limited refunds
Wealthsimple guarantees you the most optimal tax filing calculation through proper consideration of all the deductibles. They will refund you up to $50 if you get a more optimized output elsewhere.
Wealthsimple is an excellent choice if you do not want to pay to file your income tax in Canada, as the platform does not require you to pay any fees at all. You will also get complicated tax filing features like stock trading or crypto earnings.
H&R Block
H&R Block offers full-fledged tax filing consultancy and has been providing income tax management and filing support for over 55 years to Canadian taxpayers.
- Extensive features with free tax filing options with tax deductions
- Affordable professional help if needed
- Transparent pricing
- In-depth customer support is not free
- Navigation through the user interface may require some advanced knowledge
H&R Block offers one of the most comprehensive sets of features you will find in Canada. You can prepare your tax file by yourself or with the assistance and consultation of a professional. You will also get several options on how you would want to get professional advice.
The software is highly optimized to work with the latest tax policies of CRA and Revenu Quebec. You can also purchase an expert review package and several other advanced features as add-ons to help you understand the tax report in full detail.
StudioTax
StudioTax is a high-quality income tax software that requires installation and purchase of a license. StudioTax is free for Canadian taxpayers earning less than $20,000 annually or residing within Canada’s northern territories.
- Compatible with several platforms and devices
- Highly secure desktop application
- Easy to use interface for personal tax filing
- No online version
- No free option for mid-income individuals
StudioTax is compatible with Windows, Mac, Android, and iPhone/iPad so that you can effortlessly use it from any of your devices. As it is not online software, you can remain fully confident that you are unlikely to have to deal with any cyber threats when using the platform.
StudioTax also has a separate professional version, specifically designed to fulfill the extensive requirements of income tax practitioners.
Final Thoughts
Tax filing can be a daunting task for anyone. Thankfully, with the help of tax software in Canada, you can simplify the process and calculate your taxes correctly. Whether you use one of the best Canadian tax software tools like TurboTax or do it yourself manually, understanding how personal income tax works in Canada is essential to ensure efficient and accurate filing of both federal and provincial or territorial tax.
Frequently Asked Questions (FAQs)
The tax rate in Canada for 2024 depends on the individual’s income level, with higher-income earners paying a higher rate of taxes. The federal tax rates range from 15% to 33%. The provincial or territorial tax also includes several tax brackets depending on individual income levels.
Federal tax rates of Canada for 2024 range from 15% to 33%. Provincial or territorial tax rates also vary. For example, you must pay an 8.79% tax in Nova Scotia for your taxable income up to $29,590, which is the province’s lowest tax bracket. On the other hand, Alberta’s lowest tax bracket is up to $131,220, with a tax rate of 10%.
No, Canada is not the highest-taxed country in the world. According to OECD data, several European countries such as Belgium (79.5%, including federal, provincial, and municipal tax rates) and Finland (66.75%) require residents to pay a higher tax rate compared to Canada’s highest tax rate of 54.8% (Federal tax 33% and provincial tax of 21.8% at Newfoundland and Labrador).
Yes, Canada has a relatively high tax rate compared to most countries. The federal income tax rate for the 2024 tax year is 15% to 33%. In addition, you may also have to pay the provincial tax depending on the province or territory you live in.
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- Canada Revenue Agency. Canadian income tax rates for individuals – current and previous years – Canada.ca. Canada.ca. Published 2018. Accessed December 5, 2022. https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/canadian-income-tax-rates-individuals-current-previous-years.html
- Tax revenue (% of GDP) – Canada | Data. data.worldbank.org. Accessed December 5, 2022. https://data.worldbank.org/indicator/GC.TAX.TOTL.GD.ZS?locations=CA
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What is Taxable and Nontaxable Income? | Internal Revenue Service. www.irs.gov. Accessed December 5, 2022. https://www.irs.gov/businesses/small-businesses-self-employed/what-is-taxable-and-nontaxable-income