Canadian tax brackets are portions of Taxpayer’s income in Canada which get taxed at different rates.

The following is a breakdown of the Canadian Federal tax rates for 2019:

15% on the first $47,630 of taxable income Income earned between $0 – $47,630
20.5% on the next $47,629 of taxable income Income earned between $47,631 – $95,259
29% on the next $52,408 of taxable income Income earned between $95,260 – $147,667
29% on the next $62,704 of taxable income Income earned between $147,668 – $210,371
33% of taxable income over $210,371 Income earned over $210,371


Canada Tax Bracket

You will notice from the Federal tax rate breakdown that the higher spectrum of a taxpayer’s income is taxed at a higher rate. This is by design as the Canadian tax system is a progressive system. In other words, the higher tax bracket is intended to make higher earned income pay more tax then the lower-earned income.

Your tax bracket is based on taxable income, which is your gross income from all sources, minus any tax deductions you may qualify for. This is your net income after you’ve claimed all your eligible deductions.


What Tax Bracket am I in?

It is important to note that higher earners only pay higher tax rates specifically on the portion of incomes within the aforementioned brackets

For instance, if a Taxpayer earns $47, 633 of income, that individual will get $47,630 of their income taxed at 15% and the remaining 3$ taxed at 20.5%. So, fear not, your whole income will not be exposed to a higher tax rate just because you are a couple of dollars over a lower tax bracket.


Canada Tax Brackets and Capital Gains

The Canadian tax system distinguishes between taxable income earned from a source and capital gains. Capital gains get a bit more preferential treatment then the latter. More specifically, only one half of the taxpayer’s capital gain from a disposition of property is taxed at the Federal tax rates.


How Can I Lower my Canada Tax Bracket?

Effective tax planning can help an individual save large amounts of money by virtue of paying less taxes. One such method is to decrease your tax bracket by using registered plans like the RRSP. RRSP contributions specifically lower your taxable income, which means you pay less taxes that you would if you did not contribute to your RRSP.


Canada Tax Brackets – Credits and Deductions

Furthermore, the Canadian Income Tax Act has many deductions and credits that can decrease a taxpayer’s tax liability. Ones that come immediately to mind are the disability tax credit, tuition credits, and motor vehicle expense deductions for businesses.

It is important to note that credits, unlike RRSP contributions and deductions, get factored in after applying the tax rate. This means that while deductions can potentially bump down your income to a lower tax bracket, credits bypass the bracket stage entirely and decrease your overall tax liability. In any event, both are very beneficial and effective tax planning can go a long way in saving a taxpayer their hard-earned money.


If you have any questions about how to classify your taxes to obtain favourable tax results, or any questions in general about filing taxes, call us today! We can help!



This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.