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

This guide will help to demystify Canada’s federal and provincial tax rates for newcomers, and it includes quite a few examples showing how the different tax rates work between provinces. We hope it will help you navigate your 2025 tax filing season with a bit more ease.

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. So if you’re wondering “which province pays the least taxes” — you’ll get everyone’s favourite answer, it depends. 

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 for the 2025 tax year:

• 14% on taxable income up to $58,523, plus
• 20.5% on taxable income from $58,523 to $117,045, plus
• 26% on taxable income between $117,045 and $1818,440, plus
• 29% on taxable income from $181,440 to $258,482, plus
• 33% on taxable income over $258,482.

This means that everyone pays 14% on their first $58,523, then if you earn more than that, you pay 20.5% on the amount you earn above $58,523 until you earn more than $117,045, and so on.

Remember: You won’t be taxed 20.5% on every dollar you earn, just the dollars earned above $58,523. So, you won’t owe back taxes at the 20.5% for earning more than $58,523. Plus — the idea that you can ‘drop down a tax bracket’ is misguided. You can technically do it through RRSP contributions. But the benefits are typically marginal, especially for those earning lower incomes. 

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 2025

A newcomer who earned $59,762 from their employment in Ontario in 2025 may pay the following personal income taxes, according to an online personal tax calculator: 

Federal Tax: $5,595

Ontario Provincial Tax: $3,015

CPP/EI Premiums: $4,328

Total Tax: $12,938

Income Taxes in BC in 2025

Federal Tax: $5,595 (note: this is federal so usually it’s the same across Canada)

British Columbia Provincial Tax: $2,413

CPP/EI Premiums: $4,328 (note: this is federal so usually it’s the same across Canada)

Total Tax: $12,336

Income Taxes in Alberta in 2025

Federal Tax: $5,595 (note: this is federal so usually it’s the same across Canada)

Alberta Provincial Tax: $2,649

CPP/EI Premiums: $4,328 (note: this is federal so usually it’s the same across Canada)

Total Tax: $12,572

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

In this case, the person paying taxes in 2025 would pay:

• The most tax in Ontario
• The least tax in British Columbia.

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 taxable income 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.