How is income tax calculated in Canada?

Canadian income tax is calculated using a progressive tax system with both federal and provincial components. First, your total income is calculated by adding all income sources (employment, self-employment, dividends, capital gains, etc.). Then, deductions like RRSP contributions and union dues are subtracted to get your taxable income. Federal and provincial taxes are calculated separately using tax brackets, then tax credits are applied to reduce the final amount owing. The calculator automatically handles all these steps including CPP, EI, and provincial-specific calculations.

What are tax brackets and how do they work?

Tax brackets are income ranges taxed at different rates. Canada uses a progressive system where you only pay the higher rate on income within that bracket, not on all your income. For example, if you earn $60,000 and the first bracket is $50,000 at 15%, you pay 15% on the first $50,000 and a higher rate only on the remaining $10,000. Both federal and provincial governments have their own bracket systems that combine to determine your total tax owing.

Which province has the lowest taxes in Canada?

Alberta consistently has the lowest provincial income taxes in Canada, with a flat 10% rate on the first $152,354 of income and the highest Basic Personal Amount ($22,481). Among the territories, Nunavut has the lowest rates (4%-11.5%) but with a much higher cost of living. For most Canadians, Alberta offers the best combination of low taxes and reasonable living costs.

Which province has the highest taxes in Canada?

For top earners, Quebec, British Columbia, Nova Scotia, and Newfoundland and Labrador have the highest combined federal-provincial tax rates, all exceeding 50% on income over $250,000. Nova Scotia has the highest provincial rate at 21% for income over $150,000. However, these provinces often offset higher rates with more generous refundable credits for low and middle-income residents.

What is the Basic Personal Amount?

The Basic Personal Amount (BPA) is the income you can earn tax-free before paying any income tax. There are both federal and provincial BPAs that combine to reduce your taxes. For 2026, the federal BPA is up to $16,129, while provincial amounts range from $8,744 (Nova Scotia) to $22,481 (Alberta). Higher BPAs mean lower overall taxes, especially for low and middle-income earners.

What tax credits can I claim in Canada?

Canadian taxpayers can claim numerous federal and provincial tax credits. Federal credits include the Basic Personal Amount, Canada Employment Amount, Age Amount (65+), Pension Income Amount, Disability Tax Credit, Medical Expense Credit, Charitable Donations Credit, and refundable credits like the Canada Workers Benefit and GST/HST Credit. Each province offers additional credits - some provinces provide refundable credits for renters, seniors, low-income workers, children's activities, and more. Our calculator includes all major federal and provincial credits.

What's the difference between a tax credit and a tax deduction?

Tax deductions (like RRSP contributions) reduce your taxable income before tax is calculated, saving you tax at your marginal rate. Tax credits reduce the actual tax you owe after it's calculated. In Canada, most non-refundable credits are worth 15% federally (the lowest tax rate) plus the provincial rate. Refundable credits can result in money back even if you owe no tax. For example, a $1,000 RRSP deduction saves $500 if you're in the 50% tax bracket, while a $1,000 non-refundable credit saves about $150-$250 depending on province.

How do RRSP contributions reduce my taxes?

RRSP contributions reduce your taxable income dollar-for-dollar, which saves you tax at your marginal tax rate. For example, if you're in a 40% combined tax bracket and contribute $10,000 to your RRSP, you'll save approximately $4,000 in taxes. The calculator shows your estimated RRSP tax savings based on your income and province. Remember, you can contribute up to 18% of your previous year's earned income (maximum $32,490 for 2026) plus any unused contribution room.

What is the difference between federal and provincial tax?

Federal tax applies to all Canadians using the same rates and brackets nationwide, while provincial tax varies by province with different rates, brackets, and credits. Both are calculated on the same taxable income but use separate tax bracket systems. For example, someone earning $100,000 in Ontario pays federal tax using federal brackets (14.5%-26%) plus Ontario provincial tax using Ontario brackets (5.05%-11.16%). Quebec is unique - residents receive a Quebec Abatement (16.5% reduction in federal tax) but pay higher provincial rates.

How are dividends taxed in Canada?

Dividends receive preferential tax treatment through the dividend tax credit system. The dividend amount is first "grossed up" (increased by 38% for eligible dividends or 15% for non-eligible), then you claim a tax credit to offset this gross-up and more. This results in lower effective tax rates than employment income at lower income levels. Eligible dividends (from public corporations) receive a larger credit than non-eligible dividends (typically from small private corporations). The calculator automatically handles the gross-up and credit calculations for both federal and provincial taxes.

How are capital gains taxed?

In Canada, only 50% of capital gains are included in taxable income (called the inclusion rate). For example, if you have a $10,000 capital gain, only $5,000 is added to your taxable income. This $5,000 is then taxed at your regular marginal rate. Capital gains benefit from this 50% inclusion rate, making them more tax-efficient than regular employment income. The calculator automatically applies the 50% inclusion rate when you enter capital gains.

What is the difference between eligible and non-eligible dividends?

Eligible dividends come from public corporations or CCPCs (Canadian-Controlled Private Corporations) paying the high corporate tax rate. They are grossed up by 38% and receive a larger dividend tax credit. Non-eligible dividends come from CCPCs earning business income taxed at the small business rate. They are grossed up by 15% and receive a smaller credit. Eligible dividends are more tax-efficient at most income levels. Our calculator handles both types and shows the different tax treatment.

Do I have to pay CPP and EI on all income?

CPP (Canada Pension Plan) and EI (Employment Insurance) only apply to employment income and self-employment income (for CPP), not on investment income, dividends, or capital gains. For 2026, CPP contributions are 5.95% on employment income between $3,500 and $73,300 (maximum $4,055.25), plus 4% CPP2 on income between $73,300 and $83,500 (maximum $408). EI is 1.62% on the first $65,000 (maximum $1,053). Quebec has its own QPP and QPIP systems with different rates. The calculator automatically computes these based on your employment income.

What types of income does this calculator support?

Our calculator handles all major personal income types: employment income (T4), self-employment income, eligible and non-eligible dividends, capital gains, interest income, and other income. It also supports spouse/couple calculations with a combined household view, RRSP contributions, and all major federal and provincial tax credits and deductions.

How accurate is this tax calculator?

Our calculator uses the official 2026 federal and provincial tax rates, brackets, and credit amounts from the Canada Revenue Agency and provincial tax authorities. It includes all major tax calculations including CPP, CPP2, EI, dividend tax credits, capital gains treatment, RRSP deductions, and 45+ federal and provincial tax credits. While highly accurate for most situations, it's designed for estimation purposes. Complex situations involving foreign income, business income with CCA, or specialized credits may require professional tax advice.

How is Quebec tax different from other provinces?

Quebec has a unique tax system. Quebec residents receive a 16.5% Quebec Abatement (reduction in federal tax) because Quebec administers its own tax system. Instead of CPP and EI, Quebec residents pay into the Quebec Pension Plan (QPP) and Quebec Parental Insurance Plan (QPIP) with different rates. Quebec also has its own tax forms, tax credits, and provincial refundable credits that differ significantly from other provinces.

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Quebec Tax Calculator

Visually calculate your 2026, 2025, and 2024 personal Quebec taxes with detailed breakdowns and sankey diagrams.

About This Calculator

v1.4Updated: February 2026

Canadian Tax Calculator

Enter your income and deductions below, then click Calculate Tax to see a detailed breakdown of your federal and provincial taxes.

Federal & Provincial Taxes

CPP & EI Deductions

Tax Credits & Refunds

Take-Home Pay

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Employment Income (T4)

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Investments

Interest

Capital Gains

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About Quebec Income Tax

Tax Rates

14% - 25.75%

4 brackets

Basic Personal Amount

$18,571

Tax-free threshold

Tax System

Quebec

Provincial rates

Overview

Quebec operates a unique tax system distinct from other provinces. Quebec residents benefit from a 16.5% Quebec Abatement on federal tax but pay separate Quebec Pension Plan (QPP) and Quebec Parental Insurance Plan (QPIP) contributions instead of CPP and EI. Provincial tax rates range from 14% to 25.75%.

Combined Federal & Provincial Tax Brackets

Taxable Income RangeIncome Range	Federal RateFed.	Provincial RateProv.	Combined RateTotal
$0 - $54,345	14.00%	14.00%	28.00%
$54,345 - $58,523	14.00%	19.00%	33.00%
$58,523 - $108,675	20.50%	19.00%	39.50%
$108,675 - $117,045	20.50%	24.00%	44.50%
$117,045 - $132,360	26.00%	24.00%	50.00%
$132,360 - $181,440	26.00%	25.75%	51.75%
$181,440 - $258,482	29.00%	25.75%	54.75%
$258,482 - ∞	33.00%	25.75%	58.75%

* Combined rates show the total marginal tax rate (federal + provincial) for each income bracket

Federal Tax Brackets (2026)

Income Range	Rate
$0 - $58,523	14.00%
$58,523 - $117,045	20.50%
$117,045 - $181,440	26.00%
$181,440 - $258,482	29.00%
$258,482 - ∞	33.00%

QC Provincial Tax Brackets (2026)

Income Range	Rate
$0 - $54,345	14.00%
$54,345 - $108,675	19.00%
$108,675 - $132,360	24.00%
$132,360 - ∞	25.75%

How Tax Brackets Work

Tax brackets are progressive, meaning you only pay the higher rate on income within that bracket. For example, if you earn $100,000, you don't pay the highest rate on all your income. Instead, you pay the first bracket rate on the first $58,523, the second bracket rate on income from $58,523 to $117,045, and so on.

Understanding Quebec Tax Brackets

Quebec's 2026 provincial tax brackets: 14% on income up to $53,255; 19% from $53,255 to $106,555; 24% from $106,555 to $129,590; and 25.75% over $129,590. These rates are among the highest in Canada but are offset by the Quebec Abatement and various refundable credits.

Key Quebec Tax Credits

•Quebec Solidarity Tax Credit (refundable)
•Quebec Work Premium (refundable)
•Quebec Child Assistance Payment (refundable)
•Quebec Pension Plan (QPP) - separate from CPP
•Quebec Parental Insurance Plan (QPIP)

Provincial Credits Detail

Quebec provides substantial refundable credits including the Solidarity Tax Credit (up to $353 per adult for housing and sales tax), Work Premium (up to $1,043 for singles, $1,708 for families), and Child Assistance Payment (up to $2,775 per child). The province also offers credits for pension income, age, disability, and caregiving.

Tax System Highlights

✓Unique tax system with Quebec Abatement (16.5% reduction in federal tax)
✓Separate Quebec Pension Plan (QPP) and Parental Insurance Plan (QPIP)
✓Four tax brackets from 14% to 25.75%
✓High Basic Personal Amount of $18,571
✓Comprehensive Work Premium for low-income workers

Quebec Tax Calculator

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Quebec Tax Calculator

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About Quebec Income Tax

Tax Rates

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Combined Federal & Provincial Tax Brackets

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QC Provincial Tax Brackets (2026)

How Tax Brackets Work

Understanding Quebec Tax Brackets

Key Quebec Tax Credits

Provincial Credits Detail

Tax System Highlights