By Sandra MacGregor on January 18, 2024 Estimated reading time: 11 minutes
Canada’s income tax brackets for 2023, plus the maximum tax you’ll pay based on income
By Sandra MacGregor on January 18, 2024 Estimated reading time: 11 minutes
Quickly find your federal and provincial tax brackets to help you prep for your 2023 income tax return.
Advertisement
Image by Drazen Zigic on Freepik
Taxes are an inescapable fact of life in Canada. Despite this, many of us don’t think too hard about the specific federal and provincial tax brackets that govern our taxable income. Nonetheless, understanding what bracket we fall into is key to accurately estimating the amount of tax we owe on our 2023 earnings. This knowledge is particularly valuable if you are self-employed or engaged in a side gig where you’re responsible for figuring out your own tax payments. (You wouldn’t want to accidentally get on the wrong side of the Canada Revenue Agency, would you?)
Advertisement
Advertisement
An understanding of the provincial and federal tax brackets can also help you decide if you should increase your registered retirement savings plan (RRSP) contributions. Doing so could help you reduce any outstanding balance on your notice of assessment (NOA) to zero or, if you’re lucky, get a refund.
MoneySense is an award-winning magazine, helping Canadians navigate money matters since 1999. Our editorial team of trained journalists works closely with leading personal finance experts in Canada. To help you find the best financial products, we compare the offerings from over 12 major institutions, including banks, credit unions and card issuers. Learn more about our advertising and trusted partners.
How do tax brackets work in Canada?
Tax brackets outline the proportion of income tax that we need to pay based on annual earnings. Canada follows a progressive tax system, in contrast to a flat system where uniform tax rates apply to all income levels. With a progressive tax system, individuals with lower incomes pay a lower percentage of tax, and rates rise incrementally for higher-income earners as they move through different tax brackets.
Simply put, the more you earn, the more you pay as a proportion of your total income.
Within Canada’s tax system, there are five federal tax brackets, each with its own tax rates. We also pay taxes to the provincial or territorial government where we live, and each has its own distinct tax brackets. So, we’ve broken down these tax structures to help you navigate your tax obligations effectively.
What are the federal tax brackets in Canada for 2023?
We crunched the numbers so you can find your tax bracket quickly:
Annual Income (Taxable)
Tax Brackets
Tax Rates
Maximum Taxes Per Bracket
Maximum Total Tax
Up to $53,359
The first $53,359
15%
$8,003.85
$8,003.85
$53,359 to $106,717
The next $53,358
20.5%
$10,938.39
$18,942.24 ($8,003.85 + $10,938.39)
$106,717 to $165,430
The next $58,713
26%
$15,265.38
$34,207.62 ($18,942.24 + $15,265.38
$165,430 to $235,675
The next $70,245
29%
$20,371.05
$54,578.67 ($34,207.62 + $20,371.05)
Over $235,675
Over $235,675
33%
n/a
n/a
How Canada’s federal tax brackets work
In Canada, federal tax rates apply only on the amount you earn within each federal tax bracket. This is also how most provincial tax brackets work as well—we’ll get to those below.
In 2023, the lowest federal tax bracket ranges from $0 to $53,359. So, for example, if you made $50,000 from all sources of taxable income, including your salary, interest on your non-registered investments and savings accounts, benefits and more—you would fall within Canada’s first federal tax bracket.That means you will pay 15% in federal tax on your $50,000 of income—that’s $7,500, not including deductions and claims of course.
To give an another example, in November 2023, the average weekly wage across Canada was $1,254.66, according to Statistics Canada. That comes to an average annual salary of $65,242.32. That means the average person falls within the second federal tax bracket. They would pay 15% tax on their first $53,359, and 20.5% tax on their earnings above $53,359. That leaves them with $10,439.93 in federal taxes owing ($8,003.85 + $2,436.08).
Advertisement
Advertisement
How to use the federal tax bracket table
To use the table above, identify the tiers your total annual income falls into. Next, subtract the minimum dollar value of that range from your annual income. Multiply the resulting amount by the corresponding tax rate. Lastly, add the maximum total tax from the preceding bracket to estimate your federal taxes for the year 2023.
Here’s an example of how you would calculate your federal taxes owning, based on annual taxable income of $60,000 in 2023.
Identify the appropriate tier: The income amount falls within the second tier, which covers earnings from $53,359 to $106,717.
Calculate the amount within the tier: Subtract the lower boundary of that range from your annual income: $60,000 – $53,359 = $6,641.
Determine the tax rate: For the second tier, the tax rate is 20.5%.
Calculate the tax amount for this tier: Multiply the amount within the tier by the tax rate: $6,641 * 0.205 = $1,361.05.
Estimate your total federal taxes: To estimate your total federal tax liability for 2023, add this tier’s tax amount to the previous tier’s total tax amount, which would be $8,003.85 (from the first tier) plus $1,361.05, resulting in $9,364.90.
Note that these taxable income calculations have yet to take into account potential deductions that can lower your taxable income, such as RRSP contributions, the basic personal tax credit, and other deductions. Canadian tax brackets serve as a tool for getting an estimate of your federal tax liability, but the precise amount will only be determined when you complete your income tax return for the year.
We’re not done yet. After you’ve calculated your federal taxes, the next step is to determine your tax bracket for your province or territory. Remember that these calculations do not include any potential tax deductions.
Canadians pay into two levels of taxation because different levels of government are responsible for different services. For instance, provincial governments manage healthcare, while national security, including the Canadian Armed Forces and the Royal Canadian Mounted Police (RCMP), falls under federal jurisdiction. Our taxes contribute to funding these services, depending on where you live.
Since income ranges and tax rates within tax brackets can change yearly, it’s crucial to stay updated on which bracket applies to you. Keep in mind that even if tax rates remain consistent, income ranges are typically adjusted annually to account for inflation.
How tax brackets work for Canadian provinces and territories
To estimate your provincial or territorial tax liability, follow similar steps to those outlined above for the federal tax brackets.
Advertisement
Advertisement
First, you’ll need to find the table representing your province or territory. Then, find your annual income within that table. If you’re in the first tax bracket, just multiply your annual income by the corresponding tax rate.
However, if you fall into a higher bracket, there are a few additional steps: First, subtract the minimum income value of that specific bracket from your total annual income. Then, multiply the result by the corresponding tax rate. Finally, add the maximum total tax from the preceding bracket, and that will give you your estimated provincial/territorial tax liability. Keep in mind that this calculation is done prior to considering any potential surtaxes, which we will explain further below.
Here are the tax brackets for all the provinces and territories in Canada for 2023:
Examining the tax rates in Prince Edward Island and Ontario might suggest lower figures compared to other provinces, but these provinces impose a surtax on personal income, which is essentially like charging a tax on a tax.
Prince Edward Island surtax
In P.E.I., residents pay a 10% surtax, unless their basic provincial tax payable is $12,500 or less, in which case no surtax is applied. To determine the surtax, multiply your annual income by 0.10.
Ontario surtax
The Ontario surtax is more complex, so the calculation takes a few more steps, as outlined here:
Provincial Tax Owed
Surtax Rates
Up to $5,315
0%
$5,315 to $6,802
20%
More than $6,802
56% (36% + 20%)
For 2023, if your base provincial tax is up to $5,315, you won’t pay a surtax. If your base provincial tax is from$5,315 to $6,802, you pay 20% on the portion of provincial tax owed above $5,315. If your provincial tax exceeds $6,802, you will owe 20% on the portion of provincial tax over $5,315, plus 36% on the portion over $6,802.
How to lower your income tax
Understanding tax brackets makes it easier to figure out how much tax you’ll owe and if you’re in for a refund. That way you can be prepared ahead of the April 30, 2024 tax payment deadline and avoid having to pay interest and penalties on overdue taxes.
To lower your tax bill, consider a proactive approach, like making monthly contributions to your RRSP—the RRSP contribution deadline this year is February 29, 2024. You can deduct these contributions from your taxable income, potentially reducing your tax bill or increasing your tax refund, while maximizing RRSP benefits and investment growth. (Find out how much you should have in your RRSP, whether an RRSP or TFSA makes more sense for you, and what investments to consider.)
To estimate tax savings from RRSP contributions, determine the tax rate as explained above, then multiply your total contribution by that rate for the approximate tax reduction or potential refund.
I have received an appraisal amount from the province to buy out my 6.25 acres in my name a senior at 64 ? We were flooded in 2013 and this has been ongoing for 10 years.
Appraisal amount is 1,400000.00
Bought 36 years ago for 100,0000
I am on disability cop at 1350.00 a month with 70,000.00 in rental income I am a sole proprietor I claim after expenses deducted from in some
I have received an appraisal amount from the province to buy out my 6.25 acres in my name a senior at 64 ? We were flooded in 2013 and this has been ongoing for 10 years.
Appraisal amount is 1,400000.00
Bought 36 years ago for 100,0000
I am on disability cop at 1350.00 a month with 70,000.00 in rental income I am a sole proprietor I claim after expenses deducted from in some