Taxes can be complicated, but understanding Canada’s tax bracket system is the first step to maximizing deductions and savings. This guide explains federal and provincial tax rates nationwide, how to calculate taxes owed, available credits and deductions, and provides actionable strategies to optimize your 2025 tax planning.
How Do Tax Brackets Work in Canada?
A tax bracket is a range of taxable income corresponding to a specific tax rate. Canada uses a progressive tax system, meaning higher incomes are taxed at higher rates. However, it’s important to understand that you only pay the higher bracket rate on the portion of your income that exceeds the bracket threshold, not your entire income.
For example, if the tax brackets are:
- 10% on taxable income up to $50,000
- 20% on income between $50,001 – $100,000
If your taxable income is $80,000, here is how it works:
- The first $50,000 is taxed at 10% = $5,000 in taxes
- The remaining $30,000 is taxed at 20% = $6,000 in taxes
- Your total tax would be $5,000 + $6,000 = $11,000
Canada Federal Tax Brackets 2024 – 2025
The federal tax rates and income thresholds for each bracket for the 2024 and 2025 tax years are:
| 24-25 Federal Tax Rate | 2025 Federal Tax Bracket | 2024 Federal Tax Bracket |
|---|---|---|
| 15% | Up to $57,375 | Up to $55,867 |
| 20.5% | Over $57,375 up to $114,750 | Over $55,867 up to $111,733 |
| 26% | Over $114,750 up to $177,882 | Over $111,733 up to $173,205 |
| 29% | Over $177,882 to $253,414 | Over $173,205 up to $246,752 |
| 33% | Over $253,414 | Over $246,752 |
The bottom four brackets have increased by 2.7% from 2024 due to annual indexing for inflation.
The 29.32% fourth bracket accounts for the gradual reduction of the enhanced basic personal amount for incomes above $177,882. Specifically, the enhanced personal allowance begins phasing out above this income level, increasing the effective marginal rate.
The top federal rate remains at 33% for incomes surpassing $253,414. After claiming deductions like RRSP contributions, taxable income includes all sources like employment, investments, pensions, government benefits, etc.
Provincial and Territorial Tax Brackets 2024 – 2025
In addition to federal tax, Canada’s provinces and territories impose their own progressive tax rates based on taxable income levels. The province/territory you resided in on December 31st determines which provincial rates apply when you file.
Ontario Tax Rates & Tax Brackets
Ontario tax brackets for 2025 increased by about 2.8% due to inflation. The rates remain unchanged.
| Tax Rate | 2025 ON Tax Brackets | 2024 ON Tax Brackets |
|---|---|---|
| 5.05% | Up to $52,886 | Up to $51,446 |
| 9.15% | Over $52,886 up to $105,775 | Over $51,446 up to $102,894 |
| 11.16% | Over $105,775 up to $150,000 | Over $102,894 up to $150,000 |
| 12.16% | Over $150,000 up to $220,000 | Over $150,000 up to $220,000 |
| 13.16% | Over $220,000 | Over $220,000 |
Alberta Tax Rates & Tax Brackets
Effective January 1, 2025, Alberta tax rates range from 8% to 15%, in comparison with 10% to 15% in 2024. This change reduces the tax owed for individuals with income less than $60,000.
| 2025 Tax Rate | 2025 AB Tax Brackets | 2024 Tax rate | 2024 AB Tax Brackets |
|---|---|---|---|
| 8% | Up to $60,000 | ||
| 10% | over $60,00 up to $151,234 | 10% | Up to $148,269 |
| 12% | Over $151,234 up to $181,481 | 12% | Over $148,269 up to $177,992 |
| 13% | Over $181,481 up to $241,974 | 13% | Over $177,992 up to $237,230 |
| 14% | Over $241,974 up to $362,961 | 14% | Over $237,230 up to $341,502 |
| 15% | Over $362,961 | 15% | Over $355,845 |
Saskatchewan Tax Rates & Tax Brackets
| Tax Rate | 2025 SK Tax Brackets | 2024 SK Tax Brackets |
|---|---|---|
| 10.50% | Up to $53,463 | Up to $52,057 |
| 12.50% | Over $53,463 up to $152,750 | Over $52,057 up to $148,734 |
| 14.50% | Over $152,750 | Over $148,734 |
Manitoba Tax Rates & Tax Brackets
| Tax Rate | 2025 MB Tax Brackets | 2025 MB Tax Brackets |
|---|---|---|
| 10.80% | Up to $47,564 | $47,000 or less |
| 12.75% | Over $47,564 up to $101,200 | Over $47,000 up to $100,000 |
| 17.40% | Over $101,200 | Over $100,000 |
British Columbia Tax Rates & Tax Brackets
2025 BC tax brackets have increased modestly. The lowest threshold rises from $45,654 to $47,705, while the top threshold moves from $172,602 to $180,368. Tax rates stay the same.
| Tax Rate | 2025 BC Taxable income threshold | 2024 BC Taxable income threshold |
|---|---|---|
| 5.06% | Up to $49,279 | Up to $47,937 |
| 7.70% | Over $49,279 up to $98,560 | Over $47,937 up to $95,875 |
| 10.50% | Over $98,560 up to $113,158 | Over $95,875 up to $110,076 |
| 12.29% | Over $113,158 up to $137,407 | Over $110,076 up to $133,664 |
| 14.70% | Over $137,407 up to $186,306 | Over $133,664 up to $181,232 |
| 16.80% | Over $186,306 up to $259,829 | Over $181,232 up to $252,752 |
| 20.50% | Over $259,829 | Over $252,752 |
Nova Scotia Tax Rates & Tax Brackets
There have been no changes in Nova Scotia income tax brackets for a long time. However, starting from 2025, Nova Scotia has adopted indexation for its tax brackets (3.1%).
| 2025 NS Tax Rate | 2025 NS Tax Bracket | 2024 NS Tax Bracket |
|---|---|---|
| 8.79% | Up to $30,507 | Up to $29,590 |
| 14.95% | Over $30,507 up to $61,015 | Over $29,590 up to $59,180 |
| 16.67% | Over $ver $61,015 up to $95,883 | Over $59,180 up to $93,000 |
| 17.5% | Over $95,883 up to $154,650 | Over $93,000 up to $150,000 |
| 21% | Over $154,650 | Over $150,000 |
Prince Edward Island Tax Rates & Tax Brackets
| 2025 Tax Rate | 2025 PEI Tax Brackets | 2024 Tax Rate | 2024 PEI Tax Brackets |
|---|---|---|---|
| 9.5% | Up to $33,328 | 9.65% | $32,656 or less |
| 13.63% | Over $33,328 up to $64,656 | 13.63% | Over $32,656 up to $64,313 |
| 16.6% | Over $64,656 up to $105,000 | 16.65% | Over $64,313 up to $105,000 |
| 17.62% | Over $105,000 up to $140,000 | 18% | Over $105,000 up to $140,000 |
| 19% | Over $140,000 | 18.75% | Over $140,000 |
Newfoundland Tax Rates & Tax Brackets
Newfoundland and Labrador continues to index its brackets on an annual basis. The 2025 indexation factor is 1.023 (2.3% increase), applied to all NL tax brackets and credits.
| Tax Rate | 2025 NL Tax Brackets | 2024 NL Tax Brackets |
|---|---|---|
| 8.7% | Up to $44,192 | $43,198 or less |
| 14.5% | Over $44,192 up to $88,382 | Over $43,198 up to $86,395 |
| 15.8% | Over $88,382 up to $157,792 | Over $86,395 up to $154,244 |
| 17.8% | Over $157,792 up to $220,910 | Over $154,244 up to $215,943 |
| 19.8% | Over $220,910 up to $282,214 | Over $215,943 up to $275,870 |
| 20.8% | Over $282,214 up to $564,429 | Over $275,870 up to $551,739 |
| 21.3% | Over $564,429 up to $1,128,858 | Over $551,739 up to $1,103,478 |
| 21.8% | Over $1,128,858 | Over $1,103,478 |
New Brunswick Tax Rates & Tax Brackets
| Tax Rate | 2025 NB Tax Brackets | 2024 NB Tax Brackets |
|---|---|---|
| 9.4% | Up to $51,306 or less | $49,958 or less |
| 14% | Over $51,306 up to $102,614 | Over $49,958 up to $99,916 |
| 16% | Over $102,614 up to $190,060 | Over $99,916 up to $185,064 |
| 19.5% | Over $190,060 | Over $185,064 |
Quebec Tax Rates & Tax Brackets
Québec income tax brackets increase each year based on the province’s own inflation rate. The indexation factor for 2025 is 1.0285 (a 2.85% increase), reflecting Québec’s provincial Consumer Price Index (CPI) as calculated by Institut de la statistique du Québec.
| 2025 Quebec Tax Rate | 2025 Quebec Tax Brackets | 2024 Quebec Tax Brackets |
|---|---|---|
| 14% | $53,255 or less | $$51,780 or less |
| 19% | Over $53,255 up to $106,495 | Over $51,780 up to $103,545 |
| 24% | Over $106,495 up to $129,590 | Over $103,545 up to $126,000 |
| 25.75% | Over $129,590 | Over $126,000 |
Source: Tax rates and income brackets for individuals, Government of Canada
How do the BPA and the Income Tax system work together?
The Basic Personal Amount (BPA) is a fundamental component of Canada’s income tax system that represents the amount of income you can earn each year without paying income tax. It’s essentially a tax-free threshold that applies to all taxpayers, designed to ensure that individuals with very low incomes don’t pay income tax and to provide tax relief to all taxpayers.
Canada operates a dual tax system where both the federal government and provincial/territorial governments levy income taxes. This means taxpayers benefit from two BPAs:
- A federal BPA that applies to federal income tax
- A provincial or territorial BPA that applies to provincial/territorial income tax
Here’s a detailed table of the federal and provincial BPA across Canada for 2024-2025:
| Jurisdiction | 2024 BPA | 2025 BPA | Tax Rate |
|---|---|---|---|
| Federal (Canada) | $15,705 | $16,129 | 15.0% |
| Alberta | $21,885 | $22,323 | 10.0% |
| British Columbia | $12,580 | $12,932 | 5.06% |
| Manitoba | $15,780 | $15,969 | 10.8% |
| New Brunswick | $13,044 | $13,396 | 9.4% |
| Newfoundland & Labrador | $10,818 | $11,067 | 8.7% |
| Northwest Territories | $16,593 | $16,925 | 5.9% |
| Nova Scotia | $8,481 | $8,774 | 8.79% |
| Nunavut | $18,767 | $19,274 | 4.0% |
| Ontario | $12,399 | $12,747 | 5.05% |
| Prince Edward Island | $13,500 | $14,250 | 9.8% |
| Quebec | $17,183 | $17,527 | 14.0% |
| Saskatchewan | $18,491 | $18,991 | 10.5% |
| Yukon | $15,705 | $16,129 | 6.4% |
How to Calculate Your Actual Income Taxes in Canada
Follow these 5 steps to calculate your total tax bill:
- Determine your total taxable income from all sources, such as employment, investments, etc.
- Calculate your taxes: Apply the federal tax rates to your income to determine federal tax owed. For example, if your taxable income is $65,000:
- Calculate the federal taxes
- Do the same using the tax rates for your province of residence on December 31
- Add federal and provincial taxes to determine your total taxes owed
- Subtract any tax credits or deductions for which you are eligible. This gives your final net taxes owed.
Understanding the difference between marginal and average tax rates is also useful. Your marginal tax rate is the rate on your next dollar of income, while your average tax rate is your total tax bill divided by your total income.
Example: How much is your income tax if you live in Ontario and have a $95,000 annual income?
Step 1: Calculate the federal tax on $95,000
- First $55,867: $55,867 * 15% = $8,300.05
- Remaining $39,133 ($95,000 − $55,867): $39,133 * 20.5% = $8,031.27
- Total federal tax before credits: $8,380.05 + $8,031.27 = $16,411.32
Step 2: Calculate the Ontario tax on $95,000
- First $50,197: $50,197 * 5.05% = $2,538.94
- Remaining $44,803 ($95,000 − $50,197): $44,803 * 9.15% = $4,100.58
- Total Ontario tax before credits: $2,538.94 + $4,100.58 = $6,639.52
Step 3: Apply Basic Personal Amounts
These reduce the tax payable (non-refundable credits).
- Federal Basic Personal Amount: $15,705 * 15* = $2,355.75
- Ontario Basic Personal Amount: $11,865 * 5.05% = $599.27
Thus,
- Net federal tax: $16,411.32 − $2,355.75 = $14,055.57
- Net Ontario tax: $6,639.52 − $599.27 = $6,040.25
Total income tax payable is: $14,055.57 + $6,040.25 = $20,095.82
What are Tax Credits and Deductions Available?
Taking advantage of tax credits and deductions can help lower your overall tax bill. Below are the key federal and provincial tax credit programs you need to know:
Key Federal Tax Credits
In addition to the BPA, the federal government offers other non-refundable tax credits that can reduce taxes for eligible taxpayers.
- Age Credit – A non-refundable credit worth 15% of $9,028 in 2025, reduced if net income exceeds $45,522. For those 65 and older.
- Disability Tax Credit – A non-refundable credit of up to $1,521 based on a claim of $10,138 in eligible disability-related expenses.
- Charitable Donation Credit – A non-refundable credit equal to 15% of the first $200 in donations plus 29% of donations above $200. This credit can reduce taxes by up to 33% of donations over $253,414 of income.
- Canada Caregiver Credit – A non-refundable credit of up to $1,290 for care of a dependent relative with an infirmity. Reduced if the dependent’s income exceeds $20,197.
Key Provincial Tax Credits
The provinces and territories also offer tax credits to further reduce provincial taxes payable.
- British Columbia Climate Action Credit – A refundable tax credit providing up to $174 for an individual taxpayer in BC to help offset the carbon taxes paid.
- Ontario Health Premium Offset – A refundable tax credit introduced in Ontario for low-income individuals and families to offset part or all of their Ontario health premium.
- Alberta Family Employment Credit – A refundable tax credit for lower-income working families in Alberta, providing up to $2,750 for a family with two children.
Key Tax Deductions
There are notable deductions that can lower taxable income and possibly move you into a lower tax bracket:
- Child Care Expenses – Deductible child care expenses paid to allow a parent to work or attend school.
- Moving Expenses – Deductible moving costs when moving for a new job or business under certain conditions.
- Capital Losses on Investments – Can deduct half of realized capital losses in excess of gains from taxable capital gains.
- Interest Expenses and Carrying Charges – Certain interest and investment-related expenses are deductible.
- Union and Professional Dues – May deduct annual dues paid to belong to certain professional organizations.
Carefully maximizing these credits and deductions through tax planning can help lower your income taxes owed each year. Consult a tax expert for advice tailored to your situation.
Tax Planning Strategies to Optimize Savings
Proper planning and preparation can help structure your income, deductions, and investments to reduce taxes owed in Canada. Consider 8 tips below:
- Make deductible RRSP contributions up to your allowable limit to lower taxable income, for example: Home Buyers’ Plan. Additionally, make deductible spousal RRSP contributions to achieve future income splitting on withdrawals.
- Invest in Tax-Free Savings Accounts for tax-advantaged growth since income earned is not taxable.
- If your spouse is in a lower tax bracket, attribute investment income to them to lower your family’s overall tax liability.
- Sell assets with accrued capital losses to offset realized capital gains. This decreases your net taxable capital gains for the year.
- Donating securities directly instead of cash eliminates the capital gains tax otherwise due and maximizes your charitable receipt.
- Focus on asset classes structured to be tax-advantaged, like Canadian dividend stocks and preferred shares.
- Consider deferring discretionary deductions like charitable donations to a higher income year in the future.
FAQs on Canadian Income Tax
What is the highest tax bracket in Canada for 2025?
The top federal marginal tax rate is 33% on taxable income over $253,414. Combined with provincial taxes, the top bracket can exceed 50% in certain provinces.
How does moving between provinces affect my tax rate?
Since provincial taxes are based on your province of residence on December 31st, moving mid-year means your income gets split between two provincial tax rates.
What tax deductions lower my taxable income in Canada?
Key deductions include RRSP contributions, childcare expenses, capital losses on investments, and union dues. Maximizing these can help lower your tax bracket.
How are tax brackets determined in Canada for 2025?
Tax brackets are set based on taxable income thresholds indexed to inflation. The federal government and each province/territory determine their tax bracket ranges and corresponding rates.
What tax credits help reduce taxes owed in Canada?
Top federal credits include the basic personal amount, age credit, disability credit, and charitable donation credit. Some provinces also have credits.
What deductions help reduce my tax bracket the most?
RRSP contributions and realizing capital losses are two of the best ways to move down into a lower bracket. Both directly lower net taxable income.
Where can I estimate my 2025 taxes for Canada?
Consulting a tax professional or using an online Canadian tax calculator can help estimate your 2025 taxes owed based on your province, income, and deductions.
Take Action on Your 2025 Tax Planning
This guide has provided you with a detailed understanding of how tax brackets work in Canada, federal and provincial rates to be aware of, how to calculate taxes owed accurately, available credits and deductions, and actionable strategies to minimize your 2025 taxes.
Consulting a certified tax professional is highly recommended to optimize your tax planning, taking into account your specific province, income, and personal financial situation. Online tax calculators can also generate tax estimates for 2025. With proactive planning, you can maximize deductions and income sheltered from tax.
