Canadian Tax Basics
Two Levels of Tax
| Level |
Who Sets It |
| Federal |
Government of Canada |
| Provincial |
Your province |
| You pay |
Both combined |
How It Works
Gross Income
- Deductions (RRSP, etc.)
= Taxable Income
× Tax Rates
- Tax Credits
= Tax Owing/Refund
Tax Brackets Explained
What “Progressive” Means
| Not This |
Actually This |
| $100K income → 30% = $30K tax |
Different rates for different portions |
| All taxed at same rate |
Only income IN each bracket taxed at that rate |
Federal Tax Brackets 2026
| Taxable Income |
Rate |
Tax on Bracket |
| First $55,867 |
15% |
$8,380 |
| $55,867 - $111,733 |
20.5% |
$11,453 |
| $111,733 - $173,205 |
26% |
$15,983 |
| $173,205 - $246,752 |
29% |
$21,329 |
| Over $246,752 |
33% |
33% of excess |
How It Actually Works
| $80,000 Income Breakdown |
|
| First $55,867 × 15% |
= $8,380 |
| Remaining $24,133 × 20.5% |
= $4,947 |
| Total Federal Tax |
= $13,327 |
Plus provincial tax.
Marginal vs Effective Rate
| Term |
Meaning |
| Marginal rate |
Tax on your NEXT dollar |
| Effective rate |
Average tax on ALL income |
| At $80K Income |
|
| Marginal rate |
20.5% federal + ~10% prov |
| Effective rate |
~20-23% overall |
Provincial Tax Adds On
Combined Rate Example (Ontario)
| Income |
Federal |
Ontario |
Combined |
| $50,000 |
15% |
5.05% |
~20% |
| $80,000 |
20.5% |
9.15% |
~30% |
| $150,000 |
26% |
11.16% |
~37% |
What’s Taxable?
Types of Income
| Income Type |
Taxable? |
| Employment income |
Yes-full amount |
| Self-employment |
Yes-after expenses |
| Investment income (interest) |
Yes-full amount |
| Dividends |
Yes-with tax credit |
| Capital gains |
50% of gain |
| TFSA withdrawals |
No |
| CCB, GST credit |
No |
Capital Gains Explained
| Scenario |
Tax |
| Buy stock for $1,000 |
- |
| Sell for $1,500 |
$500 gain |
| Taxable amount |
$250 (50%) |
| At 30% marginal |
$75 tax |
Deductions vs Credits
Deductions
| What They Do |
Reduce taxable income |
| Effect |
Saves tax at your marginal rate |
| Example |
RRSP contribution |
RRSP Deduction Example
| $5,000 RRSP Contribution |
|
| At 30% marginal rate |
Saves $1,500 in tax |
| At 40% marginal rate |
Saves $2,000 in tax |
Credits
| What They Do |
Reduce tax directly |
| Effect |
Same value for everyone |
| Example |
Basic personal amount |
Credit Example
| Basic Personal Amount (~$15,705) |
|
| Credit rate |
15% |
| Tax reduction |
~$2,356 |
| Same for everyone |
Regardless of income |
Common Deductions
Reduce Your Taxable Income
| Deduction |
Maximum |
| RRSP contribution |
18% of income, up to ~$31,560 |
| Union dues |
Full amount |
| Child care expenses |
Varies |
| Moving expenses (for work) |
Varies |
| Student loan interest |
Full amount paid |
Common Credits
Non-Refundable (Reduce Tax to Zero)
| Credit |
Amount/Rate |
| Basic personal |
~$15,705 |
| Spouse amount |
~$15,705 |
| Medical expenses |
Over 3% of income |
| Charitable donations |
15%/29% |
| Tuition |
15% of tuition |
Refundable (Can Get Paid)
| Credit |
Details |
| GST/HST credit |
Low/moderate income |
| Canada Workers Benefit |
Working low income |
| CCB |
Families with kids |
How to File Taxes
What You Need
| Document |
From |
| T4 slip |
Employer |
| T5 slip |
Bank (interest/dividends) |
| RRSP receipts |
Financial institution |
| T2202 |
School (tuition) |
| Receipts |
Donations, medical |
Filing Options
| Method |
Best For |
| NETFILE (free software) |
Simple returns |
| TurboTax/Wealthsimple Tax |
Most people |
| Accountant |
Complex situations |
Free Tax Software
| Option |
Cost |
| Wealthsimple Tax |
Free |
| SimpleTax |
Free (donations welcome) |
| StudioTax |
Free |
Key Tax Dates
Annual Calendar
| Date |
Event |
| End of February |
T4 slips issued |
| March 1 |
RRSP deadline (for previous year) |
| April 30 |
Tax filing deadline |
| April 30 |
Payment deadline |
| June 15 |
Filing deadline (self-employed) |
Tax Refund vs Owing
Why Refunds Happen
| Reason |
|
| Too much withheld at source |
Common |
| RRSP contributions |
Reduce taxable income |
| Credits |
Medical, donations |
Why You Might Owe
| Reason |
|
| Multiple jobs |
Each withholds assuming only job |
| Self-employment income |
No withholding |
| Investment income |
Often no withholding |
Withholding at Source
Your Employer Withholds
| What |
|
| Federal tax |
Based on income |
| Provincial tax |
Based on income |
| CPP contributions |
~5.95% |
| EI premiums |
~1.63% |
Adjusting Withholding
| If Too Much Withheld |
Options |
| Large refunds yearly? |
File T1213 to reduce |
| Large RRSP contributor |
Request less withholding |
CPP and EI
Canada Pension Plan
| In 2026 |
Approximate |
| Rate |
~5.95% (employee share) |
| Maximum earnings |
~$71,300 |
| Maximum contribution |
~$4,045 |
| What you get |
Retirement pension later |
Employment Insurance
| In 2026 |
Approximate |
| Rate |
~1.63% |
| Maximum earnings |
~$65,700 |
| Maximum premium |
~$1,070 |
| What you get |
Benefits if unemployed |
Tax Planning Basics
Reduce Taxes Legally
| Strategy |
Effect |
| RRSP contributions |
Deduction now |
| TFSA investing |
Tax-free growth |
| Income splitting |
If applicable |
| Time capital gains |
When advantageous |
Common Tax Mistakes
Avoid These
| Mistake |
Solution |
| Missing deadline |
File on time |
| Forgetting deductions |
Keep records |
| Missing credits |
Check all eligible |
| Wrong info |
Double-check SIN, address |
| Not filing |
Always file, even if no income |