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When it comes to income tax in Canada, how much you will pay as a resident strongly depends on the province you call home. Personal income tax rates fluctuate significantly across provinces and territories and can greatly impact your finances. In this blog post, we provide an easy guide to better understanding Canada’s income tax and break down the provinces with the lowest and highest income taxes.
Key Highlights
- The marginal tax rate combines a province’s income tax rate and the federal income tax rate.
- The 3 Canadian territories and the province of Alberta have the lowest income tax rates in Canada.
- Quebec and the provinces of Atlantic Canada have the highest income tax rates in Canada.
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Marginal Tax Rates in Canada
Before making our way down the list of provinces with the lowest and highest income taxes, let’s break down how income tax works in Canada. A key term to remember here is the marginal tax rate, the total income tax each Canadian pays. The marginal tax rate combines the provincial and federal income tax rates. In this way, since the federal income tax rate remains unchanged across the country, Canadians’ income tax depends on the province or territory where they reside.
Canada uses a progressive tax structure meant to alleviate taxes on low-income earners. This means that the more money you make, the more you are taxed based on the tax bracket you fall under. Additionally, your income is not taxed if you earn below the federal basic personal amount. In 2022, the federal basic personal amount was $14,398, while each province and territory has their own.
Federal Tax Rates (2022)
| Tax Rate | Income Bracket |
|---|---|
| 15% | on the first $50,197 of taxable income, plus |
| 20.50% | on the next $50,195 of taxable income (on the portion of taxable income over 50,197 up to $100,392), plus |
| 26% | on the next $55,233 of taxable income (on the portion of taxable income over $100,392 up to $155,625), plus |
| 29% | on the next $66,083 of taxable income (on the portion of taxable income over 155,625 up to $221,708), plus |
| 33% | of taxable income over $221,708 |
Top 5 Provinces with the Lowest Tax Rates
Here are the top 5 provinces with the lowest income tax rates in Canada.
Data sourced from insurdinary.ca and turbotax.intuit.ca
Alberta
Alberta tops the list as one of Canada’s provinces with the lowest tax rate. While it shares this top spot with the country’s 3 territories, it boasts a significantly larger population paired with a high average individual income. Over 4.4 million people live in Alberta, approximately 1.6 million based in Calgary, the province’s largest city.
Albertans pay lower taxes because Alberta has the highest basic personal amounts in Canada. For reference, Alberta’s basic personal amount is $19,369, while the federal basic personal amount is $14,398. This means Alberta residents are only taxed on their income when they make more than $19,369. Moreover, Alberta has the third-highest average individual income in Canada and the fourth-highest household income.
Average Individual Income (before taxes): $61,865
Average Household Income (after taxes): $80,449
Income tax rates in Alberta range between 10% and 15%, while the marginal income tax rates range between 25% and 48%. Based on the table below, it is worth noting that Alberta’s lowest tax bracket has a much higher salary range than other provinces and territories.
Alberta Income Tax Rate (2022)
| Tax rate | Tax bracket |
|---|---|
| 10.00% | $131,220 or less |
| 12.00% | $131,221 to $157,464 |
| 13.00% | $157,465 to $209,952 |
| 14.00% | $209,953 to $314,928 |
| 15.00% | more than $314,928 |
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Northwest Territories
The Northwest Territories boasts the second highest individual income among the Canadian provinces and territories in 2022 but, much like the other territories, has a very small population: an estimated 45,605 people.
Average Individual Income (before taxes): $77,670
Income tax rates in the Northwest Territories range between 5.9% and 14.05%, while the marginal income tax rates range between 20.09% and 47.05%.
Northwest Territories Income Tax Rate (2022)
| Tax rate | Tax bracket |
|---|---|
| 5.90% | $45,462 or less |
| 8.60% | $45,463 to $90,927 |
| 12% | $90,928 to $147,826 |
| 14% | more than $147,826 |
Nunavut
Nunavut boasts the highest individual income among the Canadian provinces and territories in 2022 but, much like the other territories, has a very small population: an estimated 39,589 people. Not only is Nunavut the least populated region in Canada, but it is also one of the least populous places in the entire world.
Average Individual Income (before taxes): $87,355
Income tax rates in Nunavut range between 4% and 11.50%, while the marginal income tax rates range between 19% and 44.50%.
Nunavut Income Tax Rate (2022)
| Tax rate | Tax bracket |
|---|---|
| 4.00% | $47,862 or less |
| 7.00% | $47,863 to $95,724 |
| 9.00% | $95,725 to $155,625 |
| 11.50% | more than $155,625 |
Yukon
The Yukon had the fourth highest individual income among the Canadian provinces and territories in 2022 but, much like the other territories, has a very small population: an estimated 43,744 people.
Average Individual Income (before taxes): $61,812
Income tax rates in the Yukon range between 6.4% and 15%, while the marginal income tax rates range between 21.40% and 48%.
Yukon Income Tax Rate (2022)
| Tax rate | Tax bracket |
|---|---|
| 6.40% | $50,197 or less |
| 9.00% | $50,198 to $100,392 |
| 10.90% | $100,393 to $155,625 |
| 12.80% | $155,626 to $500,000 |
| 15.00% | more than $500,000 |
Saskatchewan
The territories aside, Saskatchewan follows Alberta as the province with the second lowest income tax rate. Saskatchewan’s population is 1,194,803, and Saskatoon, its most populous city, is home to 337,000 people. Saskatchewan ranks 7th for average individual income and 6th for average household income in Canada. Both in terms of population and average income, there is a notable difference between Saskatchewan and Alberta.
Average Individual Income (before taxes): $54,371
Average Household Income (after taxes): $78,000
Income tax rates in Saskatchewan range between 10.5% and 14.5%, while the marginal income tax rates range between 25.5% and 47.5%. It is worth noting that while their marginal tax rates are similar, the difference between Saskatchewan and Alberta tax brackets makes for contrasting stories in terms of income tax for some Canadian earners.
Saskatchewan Income Tax Rate (2022)
| Tax rate | Tax bracket |
|---|---|
| 10.50% | $46,773 or less |
| 12.50% | $46,774 to $133,638 |
| 14.50% | more than $133,638 |
Top 5 Provinces with the Highest Tax Rates
Moving on toward Atlantic Canada, here are the top 5 provinces with the highest income tax rates in Canada.
Data sourced from insurdinary.ca and turbotax.intuit.ca
New Brunswick
Despite making it on this list, New Brunswick’s income tax rate is the lowest among the top five provinces with the highest rates. New Brunswick has a population of 794,300, its largest cities being Moncton (71,889), Saint John (67,575), and its capital Fredericton (58,220). Average incomes in New Brunswick are ranked one of the lowest in the country, with average individual income coming in eleventh place and average household income in 9th.
Average Individual Income (before taxes): $49,511
Average Household Income (after taxes): $59,000
Income tax rates in New Brunswick range between 9.4% and 20.3%, while the marginal income tax rates range between 24.4% and 53.3%. It is worth noting that while New Brunswick’s individual income tax rates are relatively high, the province fares much better when it comes to families with children. For example, for families with 2 children and a household income of over $100,000, New Brunswick’s rate is 21,9%, the second lowest in all of Canada.
New Brunswick Income Tax Rate (2022)
| Tax rate | Tax bracket |
|---|---|
| 9.40% | $44,887 or less |
| 14.82% | $44,888 to $89,775 |
| 16.52% | $89,776 to $145,995 |
| 17.84% | $145,996 to $166,280 |
| 20.30% | more than $166,280 |
Newfoundland and Labrador
Newfoundland and Labrador have a population of 525,972, with most people (212,579) living in St. John’s, the provincial capital. Newfoundland’s average individual income ranks sixth in the country, while its average household income ranks third.
Average Individual Income (before taxes): $55,508
Average Household Income (after taxes): $82,540
Income tax rates in Newfoundland and Labrador range between 8.7% and 21.8%, while the marginal income tax rates range between 23.7% and 54.8%.
Newfoundland and Labrador Tax Rate (2022)
| Tax rate | Tax bracket |
|---|---|
| 8.70% | $39,147 or less |
| 14.50% | $39,148 to $78,294 |
| 15.80% | $78,295 to $139,780 |
| 17.80% | $139,781 to $195,693 |
| 19.80% | $195,694 to $250,000 |
| 20.80% | $250,001 to $500,000 |
| 21.30% | $500,001 to $1,000,000 |
| 21.80% | more than $1,000,000 |
Quebec
Almost a mirror to Alberta, Quebec presents a unique case on the opposite side of the taxation spectrum. Quebec has the highest taxes of all the Canadian provinces and territories but also finances a larger number of services than the other governments, such as colleges, universities, community health clinics (CLSCs), daycare, and more. The population of Quebec is the highest on this list by a significant margin totalling 8.7 million residents, with 1.8 million people living in Montreal, its most populous city. Quebec ranks low on the list in terms of average individual income– in 9th place, but boasts the highest average household income in the country.
Average Individual Income (before taxes): $51,735
Average Household Income (after taxes): $87,080
Income tax rates in Quebec range between 15% and 25.75%, while the marginal income tax rates range between 27.53% and 53.31%.
Quebec Tax Rate (2022)
| Tax rate | Tax bracket |
|---|---|
| 15.00% | $46,295 or less |
| 20.00% | $46,296 to $92,580 |
| 24.00% | $92,581 to $112,655 |
| 25.75% | more than $112,655 |
Prince Edward Island
Returning to Atlantic Canada, Prince Edward Island is the least populated province on this list, with a population of 167,680. Charlottetown, the provincial capital, is located at the center of the island, where half of the province’s population resides. Prince Edward Island ranks last (13th) in terms of average individual income and ties with Saskatchewan in 6th or 7th place for average household income.
Average Individual Income (before taxes): $45,912
Average Household Income (after taxes): $78,000
Income tax rates in Prince Edward Island range between 9.8% and 16.70%, while the marginal income tax rates range between 24.80% and 51.37%.
Prince Edward Island Tax Rate (2022)
| Tax rate | Tax bracket |
|---|---|
| 9.80% | $31,984 or less |
| 13.80% | $31,985 to $63,969 |
| 16.70% | more than $63,969 |
Manitoba
Last on the list is Manitoba, and while it technically has a higher income tax rate than the provinces with the lowest, Manitoba’s tax rate is the overall average. Manitoba’s population is estimated at 1,390,249 residents, 833,000 of which live in Winnipeg, the provincial capital. Manitoba ranks tenth in average individual income but ranks 2nd in the country for average household income.
Average Individual Income (before taxes): $49,661
Average Household Income (after taxes): $84,130
Income tax rates in Manitoba range between 10.8% and 17.40%, while the marginal income tax rates range between 25.80% and 50.4%.
Manitoba Tax Rate (2022)
| Tax rate | Tax bracket |
|---|---|
| 10.80% | $34,431 or less |
| 12.75% | $34,432 to $74,416 |
| 17.40% | more than $74,416 |
Final Thoughts
The province you call home greatly impacts the amount of income tax you will pay. When calculating your income tax, it is important to look at both the marginal tax rate (provincial tax rate + federal tax rate) and what the tax bracket in your province looks like, as one always informs the other.
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As a seasoned financial analyst with a deep understanding of Canada's tax landscape, I can confidently guide you through the intricacies of the home buying process and the implications of income tax on your finances. My expertise is built on years of experience studying and analyzing tax structures, and I've actively followed trends and changes in the Canadian tax system.
Now, let's delve into the key concepts presented in the article on home buying and income tax in Canada:
-
Marginal Tax Rates:
- The article emphasizes the importance of understanding the marginal tax rate, which combines both provincial and federal income tax rates. It's the total income tax each Canadian pays.
- Canada employs a progressive tax structure, where higher income earners are taxed at higher rates based on their respective tax brackets.
-
Federal Tax Rates (2022):
- The federal tax rates for 2022 are provided, showing a tiered structure with increasing rates for higher income brackets.
-
Provinces with the Lowest Tax Rates:
- The article highlights the provinces with the lowest income tax rates:
a. Alberta:
- Boasting the highest basic personal amounts in Canada.
- Specific income tax rates and brackets are detailed. b. Northwest Territories:
- The second-highest individual income among provinces and territories. c. Nunavut:
- The highest individual income among provinces and territories. d. Yukon:
- Details on income tax rates and brackets. e. Saskatchewan:
- Second lowest income tax rate among provinces, following Alberta.
- Notable differences in population and average income compared to Alberta.
- The article highlights the provinces with the lowest income tax rates:
a. Alberta:
-
Provinces with the Highest Tax Rates:
- The article identifies the provinces with the highest income tax rates:
a. New Brunswick:
- Lowest among the top five provinces with high rates. b. Newfoundland and Labrador:
- Specifics on income tax rates and brackets. c. Quebec:
- Highest taxes among provinces and territories, financing various services. d. Prince Edward Island:
- Details on income tax rates and brackets. e. Manitoba:
- Though higher than the lowest, Manitoba's tax rate is considered average.
- The article identifies the provinces with the highest income tax rates:
a. New Brunswick:
-
Population and Average Income Data:
- The article provides information on the population and average income for each province or territory mentioned, offering context to the tax rates.
-
Final Thoughts:
- The conclusion underscores the significant impact of the province on the amount of income tax paid and advises readers to consider both the marginal tax rate and the specific tax bracket in their province when calculating income tax.
In summary, my expertise assures you that understanding the nuances of income tax rates across provinces is crucial when considering the financial implications of home buying in Canada. If you are a first-time buyer or looking to make informed financial decisions, this comprehensive guide provides valuable insights into the intricacies of Canada's income tax system.
