Every Canadian employee pays two layers of income tax, federal and provincial, plus payroll contributions to the Canada Pension Plan and Employment Insurance. The system is fair but layered, with brackets, credits and deductions interacting in ways that are easy to misread. This guide walks through each piece for the 2026 tax year with worked examples.
Two layers of tax
Your employer withholds federal tax, provincial tax, CPP and EI from every paycheque using the CRA’s payroll formulas. When you file your return in spring, the exact amounts are calculated and you get a refund or a bill for the difference. Which province’s tax you pay depends on where you live on December 31, not where your employer is.
Federal brackets for 2026
| Taxable income | Federal rate |
|---|---|
| $0 – $58,523 | 14.0% |
| $58,523 – $117,045 | 20.5% |
| $117,045 – $181,440 | 26.0% |
| $181,440 – $258,482 | 29.0% |
| Over $258,482 | 33.0% |
The lowest rate fell to 14% for 2026 (from 15% in 2024 and 14.5% in 2025). Like all Canadian brackets they’re marginal: each rate applies only to income within that band.
Provincial and territorial tax
Each province sets its own brackets and basic personal amount. At $80,000, take-home pay ranges from $56,439 in Nova Scotia to $62,299 in Nunavut:
| Province / territory | Basic personal amount | Take-home on $80,000 |
|---|---|---|
| Nunavut | $19,659 | $62,299 |
| Northwest Territories | $18,198 | $61,166 |
| British Columbia | $13,216 | $61,157 |
| Yukon | Same as federal | $61,039 |
| Alberta | $22,769 | $60,698 |
| Ontario | $12,989 | $60,303 |
| Saskatchewan | $20,381 | $59,022 |
| New Brunswick | $13,664 | $58,246 |
| Manitoba | $15,780 | $58,239 |
| Newfoundland and Labrador | $11,188 | $57,691 |
| Prince Edward Island | $15,000 | $57,335 |
| Quebec | $18,952 | $56,737 |
| Nova Scotia | $11,932 | $56,439 |
Some provinces add extras: Ontario has a surtax and the Ontario Health Premium, and BC gives low-income earners a tax reduction. See the full provincial ranking.
Credits vs deductions
This is the single most misunderstood part of Canadian tax:
- Deductions (RRSP contributions, union dues, child care, moving expenses, the enhanced part of CPP) reduce taxable income. They save tax at your marginal rate.
- Non-refundable credits (basic personal amount, base CPP and EI, the Canada employment amount, tuition, medical, donations) reduce tax, mostly at the lowest rate (14% federally).
That’s why an RRSP contribution saves a high earner more than a low earner, while the basic personal amount is worth the same $2,303 federally to almost everyone.
CPP, CPP2 and EI
| Rate | Earnings range | 2026 maximum | |
|---|---|---|---|
| CPP | 5.95% | $3,500 – $74,600 | $4,230.45 |
| CPP2 | 4% | $74,600 – $85,000 | $416.00 |
| EI | 1.63% | Up to $68,900 | $1,123.07 |
Your employer matches CPP and pays 1.4× your EI. Read the full CPP and EI guide.
Quebec is different
Quebec residents file two returns, federal and Quebec, and pay QPP (6.30%) instead of CPP, a reduced EI rate (1.30%) and Quebec Parental Insurance Plan premiums (0.43%). Quebec provincial tax runs from 14% to 25.75%, and federal tax is reduced by a 16.5% abatement. Take-home on $80,000 in Quebec is $56,737.
Worked example: $70,000 in Ontario
| Amount | |
|---|---|
| Gross salary | $70,000 |
| Federal income tax | $7,278 |
| Ontario income tax | $3,256 |
| Ontario Health Premium | $600 |
| CPP contributions | $3,957 |
| EI premiums | $1,123 |
| Take-home pay | $53,786 |
| Total tax & contributions | $16,214 |
That works out to $4,482 a month or $2,069 every two weeks. The marginal rate on the next dollar is 34.4%.
Take-home pay at common salaries
| Salary | Ontario | British Columbia | Alberta | Quebec |
|---|---|---|---|---|
| $40,000 | $32,814 | $33,218 | $33,332 | $31,885 |
| $60,000 | $47,340 | $47,755 | $47,691 | $45,053 |
| $80,000 | $60,303 | $61,157 | $60,698 | $56,737 |
| $100,000 | $74,206 | $75,373 | $74,459 | $69,310 |
| $150,000 | $104,320 | $107,377 | $107,458 | $97,477 |
| $200,000 | $131,278 | $136,274 | $137,854 | $123,267 |
Detailed guides: $50k, $100k, $150k, $200k.
RRSP, TFSA and FHSA
- RRSP: contributions are deducted from income now and taxed when withdrawn. Best when your current rate is high. How big will my refund be?
- TFSA: no deduction, but growth and withdrawals are tax-free. Ideal for flexible savings and lower earners.
- FHSA: for first-time buyers, combining both: contributions are deductible and qualifying withdrawals for a home are tax-free.
Why you get a refund (or owe)
Payroll withholding assumes your job is your only income and that you claim only the amounts on your TD1. You’ll typically get a refund if you contributed to an RRSP, paid tuition, child care or large medical bills, or donated to charity. You’ll owe if you had two jobs, freelance income, investment income, or a pension split. If you consistently owe more than $3,000, the CRA may ask for quarterly instalments.
Ways to pay less tax
- Contribute to an RRSP or FHSA through payroll so the saving shows up immediately.
- Use your TFSA for savings before taxable accounts.
- Claim the Canada workers benefit, tuition, medical, child care and moving expenses where they apply.
- Pool donations and medical expenses with your spouse to beat the thresholds.
- Ask your employer about a group RRSP match. It’s free money.
Marginal tax rates by province at $100,000
| Province / territory | Marginal rate on the next dollar | Average rate |
|---|---|---|
| Nunavut | 27.5% | 23.3% |
| British Columbia | 28.2% | 24.6% |
| Northwest Territories | 29.1% | 24.8% |
| Yukon | 29.5% | 25.0% |
| Alberta | 30.5% | 25.5% |
| Ontario | 31.5% | 25.8% |
| Saskatchewan | 33.0% | 27.7% |
| Manitoba | 33.3% | 28.5% |
| New Brunswick | 34.5% | 28.8% |
| Newfoundland and Labrador | 36.3% | 29.6% |
| Prince Edward Island | 37.1% | 30.2% |
| Quebec | 36.5% | 30.7% |
| Nova Scotia | 38.0% | 31.1% |
Your marginal rate is what matters for RRSP contributions, raises and bonuses. Your average rate is what you pay overall.
Bonuses and overtime
Employers withhold tax on bonuses using the CRA’s bonus method, which estimates the extra tax as if the bonus were spread over the year. Withholding is often close to your marginal rate. Overtime is regular income. You can ask for a bonus to be paid directly into your RRSP, so no tax is withheld on it.
Your TD1 form
When you start a job you complete federal and provincial TD1 forms. Most people just claim the basic personal amount. If you have a second job, don’t claim it twice: tick that you have more than one employer, or you’ll owe at tax time. You can also ask for extra tax to be deducted to cover other income.
Key dates
| Date | What happens |
|---|---|
| January 1, 2026 | New brackets, credits and CPP/EI maximums |
| February 28 / March 2, 2026 | RRSP deadline for 2025 deductions (first 60 days of the year) |
| April 30, 2026 | Filing and payment deadline for 2025 returns |
| June 15, 2026 | Filing deadline if you or your spouse are self-employed |
Common mistakes
- Claiming the basic personal amount at two jobs.
- Over-contributing to an RRSP or TFSA, which triggers a 1% monthly penalty on the excess.
- Missing credits you can carry forward, such as tuition and donations.
- Not updating your province on payroll after moving.
Benefits and credits paid through your return
Filing a return isn’t only about paying tax. It’s how you qualify for income-tested benefits, many of them paid even if you owe nothing:
- GST/HST credit: a tax-free quarterly payment for individuals and families with low and modest incomes.
- Canada child benefit (CCB): a monthly tax-free payment for families with children under 18, reduced as family net income rises.
- Canada workers benefit (CWB): a refundable credit for low-income workers, with part of it available as advance payments.
- Provincial programs such as the Ontario Trillium Benefit, BC climate action and family benefits, and Alberta child and family benefit.
All of these use net income from your return, which is another reason RRSP contributions are valuable: they lower net income and can increase benefits as well as cutting tax.
Couples: pension splitting and spousal RRSPs
Canada taxes individuals, not couples, so evening out income between partners can save tax. Retirees can split eligible pension income. Working couples can use a spousal RRSP: the higher earner contributes and gets the deduction now, and the lower-income spouse withdraws later at a lower rate (after a three-year attribution period).
Frequently asked questions
When is the tax filing deadline in Canada?
April 30 for most people (June 15 if you or your spouse are self-employed, though any balance is still due April 30).
Is the federal tax rate 14% or 15%?
For 2026 the lowest federal rate is 14% on taxable income up to $58,523.
Which province has the lowest taxes?
At $80,000 it’s Nunavut. See the ranking table above.
Do I pay CPP after 65?
If you work between 65 and 70 and receive CPP, you contribute unless you elect to stop. After 70 you no longer contribute.
