Employment salary is the most common source of income in Canada. On average, full-time Canadian employees earn $54,630 in a year. How much is average salary in Canada after tax, on the other hand, is a different discussion.
Find out how much Canada salary tax 2024 you might owe. Understanding how much tax will be deducted in your payroll is crucial for effective financial planning and tax compliance throughout the year.
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Canada Salary Tax 2024
The tax you pay on salary income is income tax (federal and provincial levels), which your employer deducts from your paychecks before you get your total pay. How much tax you will owe depends on your annual salary and the tax brackets it falls into.
You will always need to file returns to determine how much to pay for your tax on salary Canada and the refunds you can get. This is mandatory so you pay the right amount and do not miss out on any credits and refundable benefits you might be eligible for.
Taxation in Canada follows a progressive tax system—you pay tax starting at the lowest bracket, then to the next tax brackets depending on how much taxable income remains. This system ensures that higher earners contribute more to support public services and infrastructure.
Federal Tax Rates
The Canadian Revenue Agency (CRA), or the federal government, sets the tax rates, adjusted annually to account for inflation. Here is what you will be paying on federal income tax in 2024, according to your federal tax brackets:
- 15% on the first $55,867 of taxable income
- 20.5% on taxable income over $55,867 up to $111,733
- 26% on taxable income over $111,733 up to $173,205
- 29% on taxable income over $173,205 up to $246,752
- 33% on any taxable income over $246,752
What’s coming? For 2025, federal tax brackets and personal tax credits (personal exemption) will increase by 2.7%.
Provincial & Territorial Income Tax Rates
Provincial governments, on the other hand, impose tax rates that vary across the country depending on the province or territory. Here’s some of the highlights:
- Lowest Starting Rates: Nunavut boasts the lowest starting tax rate at 4% for income under $53,268.
- Highest Starting Rates: Manitoba and Saskatchewan have the highest starting rates at 10.5% and 10.8%, respectively, for income under $47,000 and $52,057.
- Top Tax Brackets: Alberta has the highest top tax bracket rate at 15% for income exceeding $355,845. Conversely, Nunavut has the lowest top rate at 11.5% for income exceeding $173,205.
Tax and Other Deductions on Salary Income
The deductions vary by territories and provinces. Here are some that you might see in your payroll:
Canada Pension Plan (CPP) Contributions
The CPP is a mandatory contribution that supports retirement, disability, and survivor benefits. Both employees and employers contribute a percentage of the employee’s earnings to this plan, ensuring financial security for Canadians in their later years or in case of disability.
Employment Insurance (EI) Premiums
EI premiums provide temporary financial assistance to workers who become unemployed. Employees pay these premiums, and employers match the contributions. This system helps support taxpayers during periods of job loss.
Income Tax Deductions
Income tax deductions include federal and provincial/territorial taxes that are taken from your paycheck. The amount deducted depends on your income level and the applicable tax rates, ensuring you contribute your fair share to public services and infrastructure.
Registered Retirement Savings Plan (RRSP) Contributions
Contributions to an RRSP can be deducted from your taxable income, helping you save for retirement while reducing your tax burden. You can contribute up to a certain limit each year, making it a valuable tool for long-term financial planning.
Union Dues
Union dues are fees paid for union membership, often deducted directly from your paycheck. You can claim these dues as a deduction on your tax return, supporting unions’ advocacy for workers’ rights and benefits.
Workplace Pension Plan Contributions
Contributions to an employer-sponsored pension plan are deducted from your salary and can reduce your taxable income. These plans help ensure you have additional financial resources available upon retirement.
Other Deductions
Other deductions can include health insurance premiums, charitable donations, and more. These deductions vary based on your employer and personal circumstances but can further reduce your overall tax burden, providing additional financial relief.
Average Vs. Marginal Tax Rates
Average Tax Rate: Your overall tax is divided by your total taxable income. It gives you a general picture of your tax burden.
Marginal Tax Rate: This is the tax rate applied to the last dollar you earn. It is crucial to understand the impact of additional income on your taxes.
Example:
Let’s say you earn $65,000 in Ontario in 2024. Here’s a simplified breakdown of your average and marginal tax rates for your average salary in Canada after tax:
Federal Tax:
First $40,162 (after deductions): 15% = $6,024.30
Next $9,133: 20.5% = $1,872.27
Provincial Tax:
First $39,047: 5.05% = $1,971.87
Next $13,554: 9.15% = $1,240.19
Total Tax: $11,108.63
Average Tax Rate: 17.09%
Marginal Tax Rate: 20.5% (since your last dollar of income falls into the 20.5% tax bracket)
Key Points:
- Your marginal tax rate is the most important factor when considering the impact of additional income on your taxes.
- Understanding average and marginal tax rates can help you make informed financial decisions.
How to Calculate Tax on Salary
Here’s a quick guide on how to calculate tax on salary in Canada:
- Determine Your Taxable Income:
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- Start with your gross income (total earnings before any deductions).
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- Subtract any eligible deductions (e.g., RRSP contributions, union dues).
- Apply Federal Tax Rates
- Apply Provincial/Territorial Tax Rates
- Calculate Additional Deductions:
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- Include Canada Pension Plan (CPP) contributions and Employment Insurance (EI) premiums.
- Subtract Tax Credits:
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- Apply non-refundable tax credits (e.g., basic personal amount, CPP/QPP contributions, EI premiums).
Example Calculation
Let’s say you live in Ontario and have a gross annual salary of $75,000.
- Federal Tax Calculation:
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- First $53,359 at 15%: 53,359×0.15=$8,003.85
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- Remaining $21,641 at 20.5%: 21,641×0.205=$4,437.41
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- Total Federal Tax: $8,003.85+$4,437.41 = $12,441.26
- Provincial Tax Calculation:
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- First $47,630 at 5.05%: 47,630×0.0505=$2,404.32
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- Remaining $27,370 at 9.15%: 27,370×0.0915=$2,505.35
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- Total Provincial Tax: $2,404.32+$2,505.35 = $4,909.67
- CPP and EI Contributions:
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- CPP: 75,000×0.057=$4,275 (up to the maximum annual contribution limit).
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- EI: 75,000×0.0158=$1,185 (up to the maximum annual contribution limit).
- Total Tax and Contributions:
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- Federal Tax: $12,441.26
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- Provincial Tax: $4,909.67
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- CPP: $4,275
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- EI: $1,185
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- Average Tax Rate: 30.41%
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- Marginal Tax Rate: 29.65%
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- Total: $12,441.26+$4,909.67+$4,275+$1,185 = $22,810.93
- Net Income:
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- Gross Income: $75,000
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- Total Deductions: $22,810.93
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- Net Income: $75,000−$22,810.93 = $52,189.07
Tax Credits and Deductions
To reduce your tax burden, you can claim various credits and deductions, such as:
- Basic Personal Amount: A non-refundable credit that reduces the amount of tax you owe.
- RRSP Contributions: Contributions to a Registered Retirement Savings Plan can be deducted from your taxable income.
- Tuition and Education Credits: For students, these credits can significantly reduce taxes owed.
CRA’s Tax Adjustments Per Inflation
How your tax brackets or benefits change a bit each year is not random. The Canada Revenue Agency (CRA) adjusts these amounts annually through ‘indexing.’ This keeps things fair by accounting for inflation, so you do not pay more taxes just because prices increase.
The CRA uses the Consumer Price Index (CPI) to determine the yearly indexing factor. This way, your tax-free income and other credits stay in line with the cost of living, preventing you from getting bumped into a higher tax bracket just because everything’s more expensive.
FAQs on Canada Tax
The federal tax brackets for 2024 have been adjusted for inflation, with rates ranging from 15% to 33%.
The 2024 Federal Budget proposes an increase to 66 2/3% for gains over $250,000 after June 24, 2024, but no bill has been tabled yet.
Personal tax credits have been increased by 2.7% for 2025.
Seek Advice from Tax Professionals
If you want to ensure you are paying the right amount of Canada salary tax 2024, Legend Fusions will give you an accurate estimate. We will help you stay informed, plan wisely, and get professional guidance for all your tax affairs. From calculating your tax bill to filing returns, you can trust our tax experts. Call us today!
Jeffrey Ross
Jeffrey Ross is an experienced tax accountant focused on US-Canada cross-border taxation, with over three years in the industry, including a key role as client manager at a Canadian tax firm. He provides expertise in corporate and personal tax planning, specializing in non-resident tax, capital gains, CRA and IRS compliance, and retirement planning. Known for his personalized approach, Jeffrey is dedicated to guiding clients with clear, practical advice tailored to complex tax scenarios, aligned with the evolving tax laws.