Personal income tax rates
2023 federal tax rates are as follows:
| Federal taxable income (CAD) | Tax on first column (CAD) | Tax on excess (%) | |
| Over | Not over | ||
| 0 | 53,359 | 0 | 15.0 |
| 53,359 | 106,717 | 8,004 | 20.5 |
| 106,717 | 165,430 | 18,942 | 26.0 |
| 165,430 | 235,675 | 34,208 | 29.0 |
| 235,675 | 54,579 | 33.0 | |
Provincial/Territorial Income Taxes
In addition to federal income tax, individuals who reside in or earn income in any Canadian province or territory are subject to provincial or territorial income tax. Provincial and territorial taxes, except in Quebec, are calculated on the federal return and collected by the federal government. Tax rates and brackets vary among jurisdictions, and two provinces also impose surtaxes that can increase the total provincial income tax payable. Provincial and territorial taxes cannot be deducted when computing federal, provincial, or territorial taxable income.
Tax Calculation:
- All provinces and territories use a ‘tax-on-income’ system, setting their own rates, brackets, and credits.
- Except for Quebec, all provinces and territories use the federal definition of taxable income.
Top 2023 Provincial/Territorial Tax Rates and Surtaxes:
| Recipient | Provincial/territorial tax | Provincial/territorial surtax | ||
| Top rate (%) | Taxable income (CAD) | Rate (%) | Threshold (CAD) | |
| Alberta | 15.0 | 341,502 | N/A | N/A |
| British Columbia | 20.5 | 240,716 | N/A | N/A |
| Manitoba | 17.4 | 79,625 | N/A | N/A |
| New Brunswick | 19.5 | 176,756 | N/A | N/A |
| Newfoundland and Labrador | 21.8 | 1,059,000 | N/A | N/A |
| Northwest Territories | 14.05 | 157,139 | N/A | N/A |
| Nova Scotia | 21.0 | 150,000 | N/A | N/A |
| Nunavut | 11.5 | 165,429 | N/A | N/A |
| Ontario | 13.16 | 220,000 | 20 and 56 | 5,315 and 6,802 |
| Prince Edward Island | 16.7 | 63,969 | 10 | 12,500 |
| Quebec (1) | 25.75 | 119,910 | N/A | N/A |
| Saskatchewan | 14.5 | 142,058 | N/A | N/A |
| Yukon | 15.0 | 500,000 | N/A | N/A |
| Non-resident | 15.84 (2) | 235,675 | N/A | N/A |
Notes on Provincial/Territorial Income Taxes
Quebec has its own personal tax system, which requires a separate calculation of taxable income. Recognizing that Quebec collects its own tax, federal income tax is reduced by 16.5% of the basic federal tax for Quebec residents. Instead of provincial or territorial tax, non-residents pay an additional 48% of the basic federal tax on income taxable in Canada that is not earned in a province or territory. Non-residents are subject to provincial or territorial rates on employment income earned, and business income connected with a permanent establishment (PE), in the respective province or territory. Different rates may apply to non-residents in other circumstances.
Combined federal/provincial (or federal/territorial) effective top marginal tax rates for 2023 are shown below. The rates reflect all 2023 federal, provincial, and territorial budgets (which are usually introduced in the spring of each year). The rates include all provincial/territorial surtaxes and apply to taxable incomes above CAD 235,675 in all jurisdictions except: CAD 341,502 in Alberta, CAD 240,716 in British Columbia, CAD 1,059,000 in Newfoundland and Labrador, and CAD 500,000 in Yukon.
| Recipient | Highest federal/provincial (or territorial) tax rate (%) | |||
| Interest and ordinary income | Capital gains | Canadian dividends | ||
| Eligible (1) | Non-eligible (1) | |||
| Alberta | 48.0 | 24.0 | 34.3 | 42.3 |
| British Columbia | 53.5 | 26.8 | 36.5 | 48.9 |
| Manitoba | 50.4 | 25.2 | 37.8 | 46.7 |
| New Brunswick | 52.5 | 26.3 | 32.4 | 46.8 |
| Newfoundland and Labrador | 54.8 | 27.4 | 46.2 | 49.0 |
| Northwest Territories | 47.1 | 23.5 | 28.3 | 36.8 |
| Nova Scotia | 54.0 | 27.0 | 41.6 | 48.3 |
| Nunavut | 44.5 | 22.3 | 33.1 | 37.8 |
| Ontario | 53.5 | 26.8 | 39.3 | 47.7 |
| Prince Edward Island | 51.4 | 25.7 | 34.2 | 47.0 |
| Quebec | 53.3 | 26.7 | 40.1 | 48.7 |
| Saskatchewan | 47.5 | 23.8 | 29.6 | 41.8 |
| Yukon | 48.0 | 24.0 | 28.9 | 44.0 |
| Non-resident (2) | 48.8 | 24.4 | 36.7 | 40.8 |
Notes
For more details on eligible and non-eligible dividends, refer to the “Dividend income” section in “Income determination.” Non-resident rates for interest and dividends apply only in limited circumstances. Generally, interest (other than most interest paid to arm’s-length non-residents) and dividends paid to non-residents are subject to Canadian withholding tax (WHT).
Alternative Minimum Tax (AMT)
In addition to the normal tax computation, individuals must compute an adjusted taxable income that includes certain ‘tax preference’ items, which are typically deductible or exempt under regular taxable income calculations. If the adjusted taxable income exceeds the minimum tax exemption of CAD 40,000, a combined federal and provincial/territorial tax rate of approximately 25% is applied to the excess, resulting in the AMT. The taxpayer must then pay the greater amount between their regular tax or the AMT. Those who pay the AMT are entitled to a credit in future years, when their regular tax liability exceeds their AMT level for that year.
Draft Legislative Proposals (Effective for taxation years beginning after 2023):
- Increase in Federal AMT Rate: The federal AMT rate will increase from 15% to 20.5%.
- Increase in AMT Exemption: The AMT exemption will rise from CAD 40,000 to the start of the second from top federal tax bracket (i.e., CAD 165,430 in 2023, with indexing for 2024 and subsequent years).
- Broadened AMT Base: The AMT base will expand through changes to the ‘tax preference’ inclusions in the AMT adjusted taxable income calculation.
- Limitation on Non-Refundable Tax Credits: Only 50% of most non-refundable tax credits will be allowed to reduce the AMT.
Kiddie Tax
A minor child that receives certain passive income under an income splitting arrangement is subject to tax at the highest combined federal/provincial (or territorial) marginal rate, which can be up to 55%. This is known as the ‘kiddie tax’. The purpose of this tax is to prevent income splitting strategies that shift income to a child, who would typically be taxed at a lower rate. Under the kiddie tax, personal tax credits, other than the dividend, disability, and foreign tax credits, or other deductions, cannot be claimed to reduce the tax liability.
Income Sprinkling
Income sprinkling, which involves shifting income that would otherwise be realized by a high-tax individual (e.g., through dividends or capital gains) to low or nil tax rate family members, is restricted in Canada. This is done by applying certain aspects of the ‘kiddie tax’ rules to adults in specific situations. The ‘split income’ of the adult family member is subject to tax at the highest combined federal/provincial (or territorial) marginal rate, which can be up to 55%. Similar to the kiddie tax, personal tax credits—except for the dividend, disability, and foreign tax credits—or other deductions cannot be claimed to reduce this tax. This measure is intended to prevent high-income individuals from using private corporations to lower their overall family tax burden by distributing income to family members in lower tax brackets.
