How Much Is Income Tax In Canada? Well, It Depends On Where You Live & Work

Key Takeaways

• Canadian tax residents pay income tax at the federal level and provincial/territorial level. Provincial tax rates do vary significantly. 
• The province you’ll pay the least taxes in depends on how much you earn, as well as which credits you’re entitled to.

Read more: Get answers to your most common questions about navigating the Canadian tax season as a newcomer here.

Federal Income Tax Rates

These are the federal income tax rates that you will pay in 2024:

• 15% on taxable income up to $55,867, plus
• 20.5% on taxable income from $55,867 to $111,733, plus
• 26% on taxable income between $111,733 and $173,205, plus
• 29% on taxable income from $173,205 to $246,752, plus
• 33% on taxable income over $246,752.

This means that everyone pays 15% on their first $55,867, then if you earn more than that, you pay 20.5% until you earn more than $111,733, and so on. You won’t be taxed 20.5% on every dollar you earn, just the dollars earned above $55,867. 

Provincial Income Tax Rates

Where you live in Canada affects your cost of living significantly, and this includes the amount of tax you pay on the income you earn. We can’t get into the specifics of income tax for each province and territory in this piece, but you can see them here. Instead, we’re going to dig into what taxes look like for an average newcomer in Canada in some of the more populated provinces. 

We’re assuming a salary of $52,762 for this hypothetical newcomer. We’re also assuming no other income, no deductions, no RRSP contributions, no dividends, and no capital gains or losses. 

Income Taxes In Ontario in 2023

A newcomer who earned $52,762 in Ontario in 2023 would pay the following personal income taxes, according to the Turbo Tax Personal Income calculator: 

Federal Tax: $4,890

Ontario Provincial Tax: 2,598

CPP/EI Premiums: $3,791

Total Tax: $11,280

Income Taxes in BC in 2023

Federal Tax: $4,890

Ontario Provincial Tax: $2,046

CPP/EI Premiums: $3,791

Total Tax: $10,728

Income Taxes in Alberta in 2023

Federal Tax: $4,890

Ontario Provincial Tax: $2,797

CPP/EI Premiums: $3,791

Total Tax: $11,478

Income Taxes in Prince Edward Island in 2023

Federal Tax: $4,890

Ontario Provincial Tax: $4,361

CPP/EI Premiums: $3,791

Total Tax: $13,043

As you can see, the federal taxes remain the same no matter which province the worker lives and works in. However, the provincial tax rate does vary. 

Don’t make the mistake of concluding that BC has the lowest tax rates based on this example though. Each province has its own tax-free income limits and tax brackets, so the cheapest province for you (in terms of income taxes payable) will depend on how much you earn annually and what tax credits you might be eligible for. 

Taxes If You Live In One Province And Work In Another

Canada’s system is set up so that you pay income tax based on the province you live in, not where you work. This can be very perilous for workers who work remotely for an out-of-province employer or for those who cross into a different province for work! 

If you work in one province but live in another, there may need to be an adjustment made at tax time. This means that some workers may have had too much tax deducted by their employer throughout the year, while others may not have had enough deducted. 

Generally, you may have had too much deducted if you live in a province with lower income taxes than the province you work in. Similarly, you may not have had enough deducted if you live in a province with higher income taxes than the province you work in. 

Taxes for Temporary Residents in Canada

Your Canadian tax obligations are based on your tax residency, not your immigration status. If you’re a temporary foreign worker who is not a factual or deemed tax resident of Canada, you may need to pay non-resident withholding taxes. This is complicated and, if you’re in this position, you may wish to seek advice from a tax professional.