In Canada, income tax is charged by the Canadian government on income you earn and is the main source of revenue for the government.
You will be required to pay both federal and provincial income tax in Canada based on the tax bracket you fall in.
Generally, you are expected to pay tax on your total income from all sources less any allowable deductions.
The Income Tax Act in Canada requires Canadian citizens, residents, and non-residents earning income from a Canadian source to pay taxes on income earned.
Your income tax is an obligation, and you may be subject to penalties if you fail to pay your taxes at all or when due.
Many think of taxes as a civic responsibility or duty — even if you don’t feel good about giving the government part of your hard-earned income.
The income taxes collected are used as government spending throughout the economy.
Your taxes are fundamental to sustaining the economy and funding Canada’s educational, safety, healthcare, and infrastructure systems and projects.
The amount of income tax you pay in a given year is based on your taxable income and marginal income tax rate.
The marginal income tax rate depends on your tax bracket for the applicable tax year.
Employers generally withhold this tax and remit it directly to the CRA on your behalf.
The total tax you pay is a combination of your taxes to the federal and provincial governments.
The tax system in Canada is a progressive one, and you will be charged higher tax rates as your income increases.
For example, if you pay your income tax to the Ontario government and you have a taxable income of $100,000+ after all applicable deductions, this is how much income tax you will pay using the 2022 tax rates:
Federal Tax Rates:
- 15% on the first $50,197 of taxable income,
- 20.5% on the amount over $50,197 up to $100,392,
- 26% on the amount over $100,392 up to $155,625,
- 29% on the amount over $155,625 up to $221,708,
- 33% on the amount over $221,708
Ontario Provincial Tax Rates:
- 5.05% on the first $46,226 of taxable income,
- 9.15% on the amount over $46,226 up to $92,454,
- 11.16% on the amount over $92,454 up to $150,000,
- 12.16% on the amount over $150,000 up to $220,000
- 13.16% on the amount over $220,000
Since your taxable Income is $100,000, the federal and provincial tax rates will be applied as follows:
Federal Income Tax:
First $50,197 will be taxed at 15% = $7,529.55
The remaining $49,803 will be taxed at 20.5% = $10,209.61
Total federal income tax = $17,739.17 ($7,529.55 + $10,209.61)
Ontario Provincial Income Tax:
First $46,226 will be taxed at 5.05% = $2,334.51
The next $46,228 will be taxed at 9.15% = $4,229.86
The remaining $7,546 will be taxed at 11.16% = $842.13
Total Ontario provincial income tax = $7,406.50 ($2,334.51 + $4,229.86 + $842.13)
The total income tax you will pay for 2022 is $25,145.67 ($17,739.17 + $7,406.50).
When is Income Tax Due?
The income tax filing deadline is April 30.
However, if you or your spouse or common-law partner is self-employed, your tax filing deadline is June 15.
If you owe the Canadian government any tax payments, you will need to pay this amount by April 30.
If the tax deadline falls on a weekend, your income tax becomes due the following business day: the Monday after the weekend.
If you have taxes owing, you can pay online, by mail or in person at your financial institution.
You can file your tax before the deadline to get your tax refund processed early and avoid late-filing penalties.
It is more convenient to file your income tax online; if you file your taxes by paper, you must ensure that the tax return you have mailed arrives at the designated tax office by the tax-filing deadline.
Frequently Asked Questions
- Do all Canadians pay the same amount of income tax?
No, the income tax you pay in Canada depends on your marginal tax rate. Your marginal tax rate is based on your taxable income bracket. As your taxable income increases, you will pay higher tax rates on the portion that falls into the next tax bracket.
- What is the corporate income tax rate in Canada?
The corporate income tax rate in Canada differs from the personal income tax rate. This income tax rate is applied to resident and non-resident corporations’ income. The corporate tax rate is generally an introductory rate of 38% applied on your taxable business income and 28% after federal tax abatement. If you qualify for the General Tax Reduction, your federal corporate income tax rate is further reduced to 15%. Provincial and Territorial corporate tax rates will also be applied to taxable business income.