See also Current Marginal Tax Rates.
Canadian federal income tax is calculated based on taxable income, then non-refundable tax credits are deducted to determine the net amount payable. For 2006, every taxpayer can earn taxable income of $9,039 ($8,648 for 2005) before paying any federal tax.
The basic personal tax credit is calculated by multiplying the lowest tax rate by the basic personal amount. The 2006 tax credit is 15% x $9,039 = $1,356 (2005 is 15% x $8,648 = $1,297).
The Department of Finance announced in November 2005 that the lowest federal tax rate would be reduced from 16% to 15%, and certain tax credits would be revised to compensate for the lower tax rates. The revised rates are being used on 2005 personal income tax returns provided by Canada Revenue Agency (CRA). The tables below have been revised to include the 15% tax rate and the basic personal exemption amount increase.
| Federal Personal Income Tax Rates | ||||
| 2006 Taxable Income | 2005 Taxable Income | Marginal Tax Rates | ||
| Other Income |
Capital Gains |
Canadian Dividends |
||
| first $36,378 | first $35,595 | 15% | 7.5% | 2.08% |
| over $36,378 up to $72,756 | over $35,595 up to $71,190 | 22% | 11.0% | 10.83% |
| over $72,756 up to $118,285 | over $71,190 up to $115,739 | 26% | 13.0% | 15.83% |
| over $118,285 | over $115,739 | 29% | 14.5% | 19.58% |
| Federal Basic Personal Amount | ||||
| 2006 | 2005 | Tax Rate | ||
| $9,039 | $8,648 | 15% | ||
Canadian federal and provincial/territorial income taxes are calculated separately, although on the same tax return, except for Quebec. The rates are combined here so that taxpayers can see the total tax rate being paid, including any provincial surtaxes. The 2005 rates have been revised to include the federal tax rate change announced in November 2005.
The combined tax rates in these tables are marginal tax rates, including any provincial surtaxes. In the tables, "other income" includes income from employment, self-employment, interest from Canadian or foreign sources, foreign dividend income, etc. The tax rates shown for capital gains and Canadian dividends are the rates that would be paid on the next dollar of actual capital gains or actual Canadian dividends earned, including any provincial surtaxes.
There are an abundance of tax brackets when the federal and provincial tax tables are combined, because almost all the tax brackets for the provinces and territories differ from the federal ones.
After the income tax amounts are calculated, non-refundable tax credits are deducted from the tax payable. Non-refundable tax credits include the basic personal amount, which is available to every taxpayer. See the tables of non-refundable tax credits for more information, including federal and provincial/territorial credits.
The basic personal amount for each province and territory is listed below the tables of tax rates. This is the amount that can be earned before any provincial/territorial tax is paid.
NL has a surtax of 9% which is included in the above rates. The surtax applies when the NL income tax (after deducting non-refundable tax credits) exceeds $7,032. If provincial income tax payable after tax credits was $10,000, the surtax would be $267, or ($10,000 - $7,032) x 9%. For a single person with a tax credit for only the basic personal amount, the provincial income tax will reach $7,032 at a taxable income of $58,597 in 2006 or 2005.
PE has a surtax of 10% which is included in all the above rates. The surtax applies when the PE income tax (after deducting non-refundable tax credits) exceeds $5,200. If provincial income tax after tax credits was $10,000, the surtax would be $480, or ($10,000 - 5,200) x 10%. For a single person with a tax credit for only the basic personal amount, the provincial income tax will reach $5,200 at a taxable income of $51,858 in 2006 or 2005.
NS has a surtax of 10%, which is included in all the above rates. The surtax applies when the NS income tax (after deducting non-refundable tax credits) exceeds $10,000. If provincial income tax after tax credits was $12,000, the surtax would be $200, or ($12,000 - $10,000) x 10%. This surtax applies to both 2005 and 2004. For a single person with a tax credit for only the basic personal amount, the provincial income tax will reach $10,000 at a taxable income of $80,840 in 2006 and 2005.
Most Quebec taxpayers also get a federal tax abatement (reduction) of 16.5% of basic federal tax, which has been included in all of the above rates.
Unlike other provinces and territories, QC does not apply the lowest provincial tax rate (16%) to the basic personal amount in calculating the non-refundable tax credits.
Quebec has two different tax systems for filing personal tax returns. The dividend tax credit is not available to taxpayers filing a simplified return.
| Ontario (ON) | ||||
|
2006 Taxable income |
2005 Taxable income |
Marginal Tax Rate | ||
| Other Income |
Capital Gains |
Canadian Dividends |
||
| first $34,758 | first $34,010 | 21.05% | 10.53% | 3.23% |
| over $34,758 up to $36,378 | over $34,010 up to $35,595 | 24.15% | 12.08% | 7.11% |
| over $36,378 up to $61,206 | over $35,595 up to $59,880 | 31.15% | 15.58% | 15.86% |
| over $61,206 up to $69,517 | over $59,880 up to $68,020 | 32.98% | 16.49% | 16.86% |
| over $69,517 up to $72,102 | over $68,020 up to $70,560 | 35.39% | 17.70% | 19.88% |
| over $72,102 up to $72,756 | over $70,560 up to $71,190 | 39.41% | 19.70% | 22.59% |
| over $72,756 up to $118,285 | over $71,190 up to $115,739 | 43.41% | 21.70% | 27.59% |
| over $118,285 | over $115,739 | 46.41% | 23.20% | 31.34% |
| ON Basic Personal Amount | ||||
| 2006 | 2005 | Tax Rate | ||
| $8,377 | $8,196 | 6.05% | ||
ON has two surtaxes, which are included in the above tax
rates:
1. a surtax of 20% of ON income tax (after deducting
non-refundable tax credits) in excess
of $4,016 in 2006 ($3,929 in 2005). For a single person with a tax credit for
only the basic personal amount, the ON tax will reach
$4,016 at a taxable
income of $61,206 in 2006
and will reach $3,929 at a taxable income of $59,880 in 2005.
2. a surtax of 36% of ON income tax (after deducting
non-refundable tax credits) in excess
of $5,065 in 2006 ($4,957 in 2005). For a single person with a tax credit for
only the basic personal amount, the ON tax will reach
$5,065 at a taxable income of $72,102 in 2006 and will reach
$4,957 at a taxable income of $70,560 in
2005.
Note that the second surtax of 36% of ON income tax is in addition to the first surtax of 20%. The surtax of 20% applies to ON income tax in excess of $4,016 but less than $5,065, and both surtaxes, for a total of 56%, apply to ON income tax in excess of $5,065.
Beginning July 1, 2004, the Ontario government started collecting, through the income tax system, an Ontario Health Premium that is based on an individual's taxable income.
Marginal tax rates above do not include the Ontario Health Premium, which increases the above rates by up to 1.2%
| Ontario Health Premium | ||
|
Taxable Income |
2005 and Later Tax Years |
2004 Tax Year |
| first $20,000 | no premium | no premium |
| over $20,000 up to $25,000 | (taxable income - $20,000) x 6% | (taxable income - $20,000) x 3% |
| over $25,000 up to $36,000 | $300 | $150 |
| over $36,000 up to $38,500 | $300 + (taxable income - $36,000) x 6% | $150 + (taxable income - $36,000) x 3% |
| over $38,500 up to $48,000 | $450 | $225 |
| over $48,000 up to $48,600 | $450 + (taxable income - $48,000) x 25% | $225 + (taxable income - $48,000) x 12.5% |
| over $48,600 up to $72,000 | $600 | $300 |
| over $72,000 up to $72,600 | $600 + (taxable income - $72,000) x 25% | $300 + (taxable income - $72,000) x 12.5% |
| over $72,600 up to $200,000 | $750 | $375 |
| over $200,000 up to $200,600 | $750 + (taxable income - $200,000) x 25% | $375 + (taxable income - $200,000) x 12.5% |
| over $200,600 | $900 | $450 |
In January 2006 qualified Albertans will receive a tax-free payment of $400. In order to qualify:
There is a deadline of December 31, 2006 for filing the 2004 tax return or registering for the Canada Child Tax Benefit in order to qualify for the rebate.
Alberta charges health care insurance plan premiums, for which a subsidy is available based on the prior year taxable income. The regular annual premiums are:
Effective October 1, 2004, seniors at all income levels are exempt from Alberta health care insurance premiums.
BC charges a Medical Services Plan (MSP) premium. There is premium assistance available, based on adjusted net income for the 2 preceding tax years for an individual or couple, but the premium is not collected through the income tax system. The premium for many employees is paid, in part or in full, by their employers directly to the government. Non-employees are billed directly by MSP.
Adjusted net income is calculated by taking combined net income for tax purposes for the previous tax year, and making the following deductions:
| Spouse | $3,000 |
| 65 yrs of age or older | $3,000 |
| Spouse 65 yrs of age or older | $3,000 |
| Children - amount per child - this deduction is reduced by 50% of child care expenses claimed on either spouse's tax return |
$3,000 |
| Disability - for each disabled person | $3,000 |
Thus, a couple who are both over 65 years of age would qualify for reduced premiums with combined net income before adjustments of $37,000 or less ($33,000 or less prior to July 1, 2005).
| BC Medical Services Plan Annual Premiums | ||||
| Adjusted Net Income (individual or couple) | One Person |
Family of 2 |
Family of 3 or More |
|
| Levels pre-July 1, 2005 | Levels as of July 1, 2005 | |||
| first $16,000 | first $20,000 | no premium | no premium | no premium |
| over $16,000 up to $18,000 | over $20,000 up to $22,000 | $129.60 | $230.40 | $259.20 |
| over $18,000 up to $20,000 | over $22,000 up to $24,000 | $259.20 | $460.80 | $518.40 |
| over $20,000 up to $22,000 | over $24,000 up to $26,000 | $388.80 | $691.20 | $777.60 |
| over $22,000 up to $24,000 | over $26,000 up to $28,000 | $518.40 | $921.60 | $1,036.80 |
| over $24,000 | over $28,000 | $648.00 | $1,152.00 | $1,296.00 |
The Feb 15, 2005 BC Budget announced increased thresholds for Medical Services Plan premium assistance, effective July 1, 2005.
YT has a surtax of 5%, which is included in the above rates. The surtax applies when the YT income tax (after deducting non-refundable tax credits) exceeds $6,000. If YT income tax after tax credits was $8,000, the surtax would be $100, or ($8,000 - 6,000) x 5%. This surtax applies to both 2006 and 2005. For a single person with a tax credit for only the basic personal amount, the YT income tax will reach $6,000 at a taxable income of $77,161 in 2006 ($76,628 in 2005).