Last Updated On 21 February 2023, 9:20 AM EST (Toronto Time)
Canada Revenue Agency (CRA) kicks off the 2023 tax-filing season on February 20, 2023 and Canadians have to file their 2022 tax returns before May 1, 2023.
Understanding the tax system in Canada can help you plan your career, life, and expenses better.
Canada has a progressive tax system i.e your taxes will depend on the tax bracket based on your salary.
This article will help understand how the tax system works in Canada.
Canada Tax Fundamentals/ basics
The Canada Revenue Agency (CRA) administers income tax in Canada. Furthermore, Canada’s tax year begins from January 1 to December 31.
Additionally, the due date to pay unpaid income tax is by May 1, 2023 this year. There may be a penalty for late submissions, but they are still accepted.
Employers generally withhold statutory tax deduction from your wages and remit CRA.
Canada has a progressive tax system, meaning as your salary increases, you’ll fall into a higher tax bracket.
When filing taxes, you’ll pay federal plus provincial tax. The federal tax has a standard tax bracket that may update each year.
In comparison, the provincial tax changes depending on your location.
Below is an example to help you understand how taxes in Canada are calculated. For simplification, the example below demonstrates calculations for federal tax.
Important Dates For Tax-Filing Season 2023
Mar 1, 2023: Deadline to contribute to an RRSP, a PRPP, or an SPP
Apr 30, 2023 (May 1, 2023 since April 30 is a Sunday): Deadline to file your taxes
Jun 15, 2023: Deadline to file your taxes if you or your spouse or common-law partner are self-employed
Apr 30, 2023 (May 1, 2023 since April 30 is a Sunday): Deadline to pay your taxes
Let’s say your taxable income in 2022 was $51,000. Here’s how you can calculate estimate for your federal tax.
Since your salary lies within the first and second tax bracket, you’ll pay:
15% tax on the amount up to $50,197 = $7,529.55
20.5% on the remaining amount between $50,197 to $100,392
$51,000-$50,197 = $803
So, 20.5% of $980 = $164.61
Total estimated federal tax = $7,529.55 + $164.61 = $7694.16.
Please note this is just an estimate and actual tax owed by you may be different depending on CPP/EI premiums and other proactive tax deductions from your salary.
Similarly, you can calculate the provincial tax depending on that province’s tax brackets as mentioned below.
Provinces / Territories
Rates for 2022 tax year
Newfoundland and Labrador
8.7% on the first $39,147 of taxable income, + 14.5% on the next $39,147, + 15.8% on the next $61,486, + 17.8% on the next $55,913, + 19.8% on the next $54,307, + 20.8% on the next $250,000, + 21.3% on the next $500,000, + 21.8% on the amount over $1,000,000
Prince Edward Island
9.8% on the first $31,984 of taxable income, + 13.8% on the next $31,985, + 16.7% on the amount over $63,969
Nova Scotia
8.79% on the first $29,590 of taxable income, + 14.95% on the next $29,590, + 16.67% on the next $33,820, + 17.5% on the next $57,000, + 21% on the amount over $150,000
New Brunswick
9.40% on the first $44,887 of taxable income, + 14.82% on the next $44,888, + 16.52% on the next $56,180, + 17.84% on the next $20,325, + 20.3% on the amount over $166,280
Quebec
15% on the first $46,295 of taxable income, + 20% on the next $46,285, + 24% on the next $20,075, + 25.75% on the amount over $112,655
Ontario
5.05% on the first $46,226 of taxable income, + 9.15% on the next $46,228, + 11.16% on the next $57,546, + 12.16% on the next $70,000, + 13.16% on the amount over $220,000
Manitoba
10.8% on the first $34,431 of taxable income, + 12.75% on the next $39,985, + 17.4% on the amount over $74,716
Saskatchewan
10.5% on the first $46,773 of taxable income, + 12.5% on the next $86,865, + 14.5% on the amount over $133,638
Alberta
10% on the first $131,220 of taxable income, + 12% on the next $26,244, + 13% on the next $52,488, + 14% on the next $104,976, + 15% on the amount over $314,928
British Columbia
5.06% on the first $43,070 of taxable income, + 7.7% on the next $43,071, + 10.5% on the next $12,760, + 12.29% on the next $21,193, + 14.7% on the next $42,738, + 16.8% on the next $64,259, + 20.5% on the amount over $227,090
Yukon
6.4% on the first $50,197 of taxable income, + 9% on the next $50,195, + 10.9% on the next $55,233, + 12.8% on the next $344,375, + 15% on the amount over $500,000
Northwest Territories
5.9% on the first $45,462 of taxable income, + 8.6% on the next $45,465, + 12.2% on the next $56,899, + 14.05% on the amount over $147,826
Nunavut
4% on the first $47,862 of taxable income, + 7% on the next $47,862, + 9% on the next $59,901, + 11.5% on the amount over $155,625
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