Canadian Income Tax Brackets 2026:
Federal and All Provinces

Tax season in Canada means filing your 2025 return — and understanding which bracket your income falls into can save you real money. Canada uses a progressive tax system, meaning you pay higher rates only on the portion of income above each threshold, not on your entire income.

This guide covers the 2025 federal tax brackets, all 13 provincial and territorial rates, and how to calculate your actual tax owing. We also explain the difference between marginal and average rates — one of the most misunderstood concepts in Canadian tax.

2026 federal income tax brackets

Canada's federal tax brackets are adjusted for inflation each year, and for 2026 there's an extra change: the lowest federal rate dropped from 15% to 14%, the first full year the lower rate applies. For the 2026 tax year, the brackets are:

Everyone also receives the basic personal amount of $16,452 for 2026 (up from $16,129 in 2025) — a non-refundable credit that reduces the first $16,452 of income from federal tax entirely. This means the effective starting point for paying federal tax is around $16,452, not zero. (The basic personal amount gradually phases down for very high earners.)

Marginal rate vs average rate: what's the difference?

This is the single most important concept to understand about Canadian taxes — and the one most people get wrong.

Marginal tax rate

Your marginal rate is the rate you pay on the next dollar you earn — the rate of the highest bracket you've reached. If you earn $80,000 in Ontario, your federal marginal rate is 20.5% (you've crossed the first bracket). Combined with Ontario's provincial rate at that income, your marginal rate is roughly 29.65%. This rate matters when you're deciding whether to take on more work, contribute to an RRSP, or take a bonus.

Average (effective) tax rate

Your average rate is your total tax divided by your total income. Because most of your income is taxed at lower rates (the first $16,452 at 0%, the next $57,375 at 14%, and so on), your average rate is always significantly lower than your marginal rate. A $80,000 income in Ontario results in a combined average rate of roughly 21–23% — not 30%.

The 2026 rate cut (15% → 14% on the first bracket) and higher basic personal amount leave more in your pocket than the same income did in 2025. These are estimates — actual amounts depend on your deductions, credits, and other income. Use our income tax calculator for your precise figures including RRSP deductions and dividend income.

How CPP and EI affect your paycheque

Income tax isn't the only deduction on your pay stub. Two mandatory contributions reduce your take-home pay before income tax even comes into play:

Canada Pension Plan (CPP) — 2026 rates

• Employee contribution rate: 5.95% of pensionable earnings
• Basic exemption: $3,500 (you don't pay CPP on the first $3,500)
• Year's Maximum Pensionable Earnings (YMPE): $74,600
• Maximum employee contribution: $4,230.45 per year
• CPP2 applies above $74,600 up to $85,000 at a rate of 4% (maximum $416)

Employment Insurance (EI) — 2026 rates

• Employee premium rate: 1.63% of insurable earnings
• Maximum insurable earnings: $68,900
• Maximum annual premium: $1,123.07 per year
• Quebec residents pay a reduced rate of 1.30% (maximum $895.70) due to the QPIP program

Provincial and territorial tax rates

On top of federal tax, each province and territory has its own tax brackets. Combined federal + provincial marginal rates range from about 44% in Alberta at higher incomes to over 54% in Nova Scotia. The brackets below reflect the most recently published provincial rates; because each province indexes its thresholds on its own schedule, confirm the current-year figures with your provincial tax authority or use our calculator for a combined estimate:

How RRSP contributions reduce your tax bill

An RRSP contribution is one of the most effective ways to reduce your taxable income in Canada. Every dollar you contribute to your RRSP is deducted from your income before tax is calculated — so the savings depend directly on your marginal rate.

If you're in the 43.41% combined marginal bracket (federal + Ontario for incomes around $100,000–$115,000), a $10,000 RRSP contribution saves you approximately $4,341 in tax. That's money back in your pocket now, with the tax only owing when you withdraw in retirement — ideally at a lower marginal rate.

The 2025 RRSP contribution limit is 18% of your 2024 earned income, up to a maximum of $31,560. Any unused room carries forward from prior years.

Tax credits that reduce what you owe

Tax brackets tell you your gross tax — but credits reduce the actual amount you pay. The most important federal credits for most Canadians:

• Basic personal amount ($16,452): Everyone gets this — it makes the first $16,452 of income effectively tax-free at the federal level
• CPP/EI credit: Your base CPP contributions and EI premiums generate a 14% non-refundable federal tax credit
• Canada employment amount ($1,471): A small credit for employment income
• Spousal amount: If you support a spouse with low income, you may claim a credit based on their income
• Disability tax credit: A significant credit for those with severe disabilities — up to $9,428 federally
• Medical expenses: Eligible medical costs above 3% of net income or $2,635 (whichever is less) are creditable
• Charitable donations: 14% on the first $200, 29–33% on donations above $200

Capital gains and dividend tax in Canada (2026)

Not all income is taxed the same way. Two common investment income types receive preferential treatment:

Capital gains

For 2026, the capital gains inclusion rate is 50% for everyone. The 2024 federal budget had proposed raising the rate to two-thirds (66.67%) on individual gains above $250,000, but that increase was deferred and then cancelled outright in March 2025. So half of any capital gain is added to your income and taxed at your marginal rate — the other half is tax-free, regardless of the size of the gain.

Eligible Canadian dividends

Dividends from Canadian corporations are grossed up by 38% before being added to income, then you receive a federal dividend tax credit of 15.02% of the grossed-up amount. The net effect is a significantly lower effective tax rate on eligible dividends compared to employment income — often 10–25 percentage points lower at the same income level.