To give an another example, in September 2024, the average weekly wage across Canada was $1,304.43, according to Statistics Canada. That comes to an average annual salary of $67,830.36.
That means the average working Canadian falls within the second federal tax bracket. They would pay 15% tax on their first $55,867, and 20.5% tax on their earnings above $55,867. That leaves them with $10,841.54 in federal taxes owing ($8,389.05 + $2,452.49).
How to use the federal tax bracket table
To use the table above, identify the tiers your total annual income falls into. Next, subtract the minimum dollar value of that range from your annual income. Multiply the resulting amount by the corresponding tax rate. Lastly, add the maximum total tax from the preceding bracket to estimate your federal taxes for the year 2024.
Here’s an example of how you would calculate your federal taxes owning, based on annual taxable income of $60,000 in 2024.
Identify the appropriate tier: The income amount falls within the second tier, which covers earnings from $55,867 to $111,733.
Calculate the amount within the tier: Subtract the lower boundary of that range from your annual income: $60,000 – $55,867 = $4,133.
Determine the tax rate: For the second tier, the tax rate is 20.5%.
Calculate the tax amount for this tier: Multiply the amount within the tier by the tax rate: $4,133 x 0.205 = $847.26.
Estimate your total federal taxes: To estimate your total federal tax liability for 2024, add this tier’s tax amount to the previous tier’s total tax amount, which would be $8,389.05 (from the first tier) plus $847.26, resulting in $9,236.31 in taxes payable.
Note on deductions
These taxable income calculations have yet to take into account potential deductions that can lower your taxable income, such as the basic personal tax credit ($15,705 for 2024), RRSP contributions and other deductions. Canadian tax brackets serve as a tool for getting an estimate of your federal tax liability, but the precise amount will only be determined when you complete your income tax return for the year.
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Provincial and territorial tax brackets in Canada
You’re not done yet. After you’ve calculated your federal taxes, the next step is to determine your tax bracket for your province or territory. (Remember these calculations do not include any potential tax deductions but they can help guide you on any tax saving opportunities, such as RRSP contributions.)
Canadians pay into two levels of taxation because different levels of government are responsible for different services. For instance, provincial governments manage healthcare, while national security, including the Canadian Armed Forces and the Royal Canadian Mounted Police (RCMP), falls under federal jurisdiction. Our taxes contribute to funding these services, depending on where you live. (There are also municipal taxes, but those are not taken from income but are calculated based on property owned in the municipality.)
Since income ranges and tax rates within tax brackets can change yearly, it’s crucial to stay updated on which bracket applies to you. Keep in mind that even if tax rates remain consistent, income ranges are typically adjusted annually to account for inflation.
