While there are federal income tax rates that apply to all Canadians, each province and territory also has its own income tax rates. It’s the combination of these two rates that helps determine what Canadian citizens pay in annual income taxes.
» MORE: What are income taxes?
What are provincial income tax rates?
Provincial income tax rates are distinct rates charged by each province or territory. Each province determines its own tax rates, credits, deductions, etc. And except for Quebec, all provinces use the federal definition of taxable income.
As with federal tax rates, provincial tax rates aren’t applied as a flat rate on all your income. Rather, you pay the applicable tax rate for level each of income over a certain amount, called a tax bracket.
For example, someone who lives in British Columbia and makes $60,000 in taxable income might pay a 5.06% tax rate on their first $42,184 and 7.7% on the remaining $17,816 of their income, rather than 7.7% on the full $60,000.
Your provincial tax rate is determined by where you live, at the end of each tax year, generally December 31st. It doesn’t matter if you lived in another (or several other) provinces throughout the year, the rate you are charged depends on your province or territory of residence specifically on the last day of the year.
» MORE: How tax credits work in Canada
Current provincial income tax rates
Provincial tax brackets, and the rates that apply to those brackets, vary quite a bit. Here are Canada’s provincial and territorial tax rates for 2021.
| Province/Territory | 2021 Income Tax Rates |
|---|---|
| Alberta | 10% on the first $131,220 of taxable income, plus 12% on the next $26,244, plus 13% on the next $52,488, plus 14% on the next $104,976, plus 15% on the amount over $314,928 |
| British Columbia | 5.06% on the first $42,184 of taxable income, plus 7.7% on the next $42,185, plus 10.5% on the next $12,497, plus 12.29% on the next $20,757, plus 14.7% on the next $41,860, plus 16.8% on the next $62,937, plus 20.5% income over $222,420 |
| Manitoba | 10.8% on the first $33,723 of taxable income, plus 12.75% on the next $39,162, plus 17.4% on the amount over $72,885 |
| New Brunswick | 9.68% on the first $43,835 of taxable income, plus 14.82% on the next $43,836, plus 16.52% on the next $54,863, plus 17.84% on the next $19,849, plus 20.3% on the amount over $162,383 |
| Newfoundland and Labrador | 8.7% on the first $38,081 of taxable income, plus 14.5% on the next $38,080, plus 15.8% on the next $59,812, plus 17.3% on the next $54,390, plus 18.3% on the amount over $190,363 |
| Northwest Territories | 5.9% on the first $44,396 of taxable income, plus 8.6% on the next $44,400, plus 12.2% on the next $55,566, plus 14.05% on the amount over $144,362 |
| Nova Scotia | 8.79% on the first $29,590 of taxable income, plus 14.95% on the next $29,590, plus 16.67% on the next $33,820, plus 17.5% on the next $57,000, plus 21% on the amount over $150,000 |
| Nunavut | 4% on the first $46,740 of taxable income, plus 7% on the next $46,740, plus 9% on the next $58,498, plus 11.5% on the amount over $151,978 |
| Ontario | 5.05% on the first $45,142 of taxable income, plus 9.15% on the next $45,145, plus 11.16% on the next $59,713, plus 12.16% on the next $70,000, plus 13.16% on the amount over $220,000 |
| Prince Edward Island | 9.8% on the first $31,984 of taxable income, plus 13.8% on the next $31,985, plus 16.7% on the amount over $63,969 |
| Quebec | 15% on the first $45,105 of taxable income, plus 20% on the next $45,095, plus 24% on the next $19,555, plus 25.75% on the amount over $109,755 |
| Saskatchewan | 10.5% on the first $45,677 of taxable income, plus 12.5% on the next $84,829, plus 14.5% on the amount over $130,506 |
| Yukon | 6.4% on the first $49,020 of taxable income, plus 9% on the next $49,020, plus 10.9% on the next $53,938, plus 12.8% on the next $348,022, plus 15% on the amount over $500,000 |
| Source: Canada.ca |
How do provincial income taxes work with federal taxes?
Provincial and federal income taxes are combined to determine the overall amount of income tax each Canadian must pay. To come up with the total, you could calculate your federal taxes first, then calculate your provincial taxes and add them together.
So, using the example above of $60,000 in taxable income for a person living in B.C.:
- Total federal income taxes might be: $9,603.90 ($49,020 at a 15% tax rate, then $10,980 at 20.5% a tax rate)
- Total provincial income taxes would be: $3,506.34 ($42,184 at a 5.06% tax rate, then $17,816 at a 7.7% tax rate)
- Total income tax: $9,603.90 + $3,506.34 = $13,110.24
Provincial taxes and fees are collected by the federal government through the Canada Revenue Agency in all provinces and territories except Quebec, which handles its own tax collection through Revenu Québec. This means Quebec residents need to file two returns every year: federal and provincial.
» MORE: What are tax deductions?
Other provincial tax concerns
Just like there are federal tax credits available for individuals in Canada, which can reduce the amount of federal tax you owe, there are provincial and territorial tax credits available as well. Obviously, these will differ from province to province but you can search for any applicable tax credits in your home province on the Government of Canada website.
About the Author
How Does a Tax Refund Work in Canada?
How First-Time Buyers Can Claim a $5,000 Tax Credit
What Canadian Employees Should Know About T4 Slips
