How your pay is taxed in Canada
Canadians pay income tax twice on the same income: once to the federal government and once to their province. Both use progressive brackets, and both give you non refundable credits, most importantly the basic personal amount, which works like a tax free allowance. On top of income tax, employees pay Canada Pension Plan (CPP) contributions and Employment Insurance (EI) premiums.
Federal tax brackets 2026
From 2026 the lowest federal rate is 14 percent, down from 15 percent. The federal basic personal amount is $16,452, gradually reduced to $14,829 for incomes between $181,440 and $258,482.
| Taxable income | Federal rate |
|---|---|
| Up to $58,523 | 14% |
| $58,523 to $117,045 | 20.5% |
| $117,045 to $181,440 | 26% |
| $181,440 to $258,482 | 29% |
| Over $258,482 | 33% |
Provincial tax 2026: Ontario, BC and Alberta
| Province | Rates | Basic personal amount |
|---|---|---|
| Ontario | 5.05% to 13.16%, plus surtax and the Ontario Health Premium | $12,989 |
| British Columbia | 5.60% to 20.50% | $13,216 |
| Alberta | 8% to 15% | $22,769 |
CPP, CPP2 and EI in 2026
| Contribution | Employee rate | Earnings range | Maximum |
|---|---|---|---|
| CPP | 5.95% | $3,500 to $74,600 | $4,230.45 |
| CPP2 | 4% | $74,600 to $85,000 | $416 |
| EI | 1.63% | Up to $68,900 | $1,123.07 |
How RRSP contributions cut your tax
RRSP contributions are deducted from your taxable income, so they save tax at your top combined rate. At $75,000 in Ontario, each $1,000 in an RRSP saves roughly $300 in tax. The enhanced part of CPP and all of CPP2 are deductible in the same way, while base CPP and EI earn tax credits.
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Sources: Canada Revenue Agency, indexation of tax brackets and amounts for 2026; CRA CPP and EI maximums for 2026; Ontario, British Columbia and Alberta provincial tax rates.
