How is income tax calculated in Canada?
Canada uses progressive marginal brackets at both the federal and provincial level. Federal rates for the current year run from 15% on the first ~$55,867 up to 33% above ~$246,752. Your province adds its own bracket set on top. A basic personal amount (~$15,705 federal) is deducted as a non-refundable credit, so the first slice of income is effectively tax-free.
What is the difference between marginal and average tax rate?
Your marginal rate is the tax on your next dollar earned (the top bracket you reach). Your average rate is your total tax divided by total income. Because only income within each bracket is taxed at that bracket rate, your average rate is always lower than your marginal rate.
Does this estimate include CPP and EI?
No. This estimates federal and provincial income tax only. Canada Pension Plan (CPP) and Employment Insurance (EI) are separate payroll deductions. Use the Payroll Deductions calculator to include CPP and EI.
Are tax brackets the same every year?
No. Federal and provincial brackets, the basic personal amount, and credits are indexed to inflation and change annually. Always confirm current-year figures with the CRA or a tax professional before filing.