How income tax works in Canada
Canadian tax residents generally report worldwide employment, business, pension, rental and investment income. Non-residents normally pay Canadian tax on Canadian-source income, with the exact filing method depending on the source and any applicable treaty.
The 2026 federal taxable-income brackets are 14% up to CAD 58,523, 20.5% from CAD 58,523 to CAD 117,045, 26% to CAD 181,440, 29% to CAD 258,482 and 33% above CAD 258,482. Each rate applies only to the slice in that bracket.
A province or territory adds its own progressive tax. For 2026, the provincial top rate ranges from 11.5% in Nunavut to 25.75% in Quebec, with different brackets and surtaxes elsewhere. The combined result is therefore much more useful than the federal rate alone.
Employees usually pay Canada Pension Plan contributions and Employment Insurance premiums through payroll. In 2026, the employee CPP base and first-enhancement rate is 5.95% up to the applicable ceiling, CPP2 adds 4% on the second earnings band, and EI outside Quebec is 1.63% up to its annual maximum.
Self-employed people calculate business income after eligible expenses and generally pay both sides of CPP or the Quebec Pension Plan, alongside income tax. Payroll withholding is an advance payment and does not by itself settle the final return.
Income tax brackets in Canada
| Bracket | Rate | Notes |
|---|---|---|
| CAD 0 - CAD 58,523 | 14% | Federal 2026 rate |
| CAD 58,523.01 - CAD 117,045 | 20.5% | Federal 2026 rate |
| CAD 117,045.01 - CAD 181,440 | 26% | Federal 2026 rate |
| CAD 181,440.01 - CAD 258,482 | 29% | Federal 2026 rate |
| Above CAD 258,482 | 33% | Federal 2026 rate; provincial tax is additional |
Tax rates at a glance
- Personal income tax
- 14% - 54.8%
- Federal bracket 1
- 14%CAD 0 - CAD 58,523
- Federal bracket 2
- 20.5%CAD 58,523 - CAD 117,045
- Federal bracket 3
- 26%CAD 117,045 - CAD 181,440
- Federal bracket 4
- 29%CAD 181,440 - CAD 258,482
- Federal bracket 5
- 33%Above CAD 258,482
- Combined top marginal rate
- About 44.5% - 54.8%
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
EmployeesFreelancersExpatsHigh earnersFamilies
Watch out for
- The federal table is not a take-home-pay table. Provincial tax, non-refundable credits, deductions, Ontario surtaxes, Quebec's separate system and payroll contributions can all change the effective result.
- Tax residence is decided from the whole fact pattern. A person can be a factual resident because of significant residential ties, a deemed resident after 183 days, or a deemed non-resident under a tax treaty.
- Quebec residents generally file a separate provincial return and use QPP, Quebec EI and QPIP rules. A calculation prepared only with the ordinary CRA provincial tables can be incomplete.
- Foreign salary, dividends, pensions, rent and investment income generally remain within the worldwide-income return of a Canadian resident. Foreign tax credits and treaty relief are limited by their own rules.
- A person who leaves Canada may have a final-year return, information forms and departure-tax calculations even if no asset was actually sold. The date residential ties are severed matters.
Frequently asked questions
What are Canada's 2026 federal income-tax rates?
The 2026 federal rates are 14%, 20.5%, 26%, 29% and 33%, applying progressively to taxable-income bands ending at CAD 58,523, CAD 117,045, CAD 181,440 and CAD 258,482. Provincial or territorial tax is added.
What is the top income-tax rate in Canada?
The federal top marginal rate is 33%. Once provincial or territorial tax is added, the 2026 combined top marginal rates range from about 44.5% to 54.8% across the published provincial and territorial schedules, with Quebec using its own administration and abatement rules.
Do Canadian residents pay tax on foreign income?
Generally yes. Canadian residents report worldwide income, although foreign tax credits, treaty provisions, deductions and the type of income can reduce double taxation.