Income tax in Canada is based on a progressive tax system, meaning the more you earn, the more you pay. But figuring out how much you actually owe isn’t always straightforward. Knowing how to calculate your income tax is key to budgeting effectively and avoiding any surprises when you file your return. 

In this guide, we’ll dive into federal and provincial tax brackets, common deductions, and how to estimate your taxes. Plus, we’ll show you how Chexy Tax lets you pay your taxes with a credit card—so you can earn rewards on money you’d have to pay anyway.

How is Income Tax Calculated in Canada?

Canada uses a progressive tax system, which means the more you earn, the more you get taxed. Your income tax bill is made up of:

• Federal income tax (applies to all Canadians)

• Provincial or territorial income tax (varies depending on where you live)

Federal income tax is calculated separately from provincial income tax; however, both are calculated on the same tax return (except Quebec). 

Filing your taxes as a Quebec resident? Learn how to do so here. 

All provinces and territories, except Quebec, follow a “tax-on-income” system introduced in 2000. This means provincial and territorial taxes are based on federally calculated taxable income, with each region applying its own tax rates and brackets. 

In addition to federal taxes, taxpayers must also pay provincial or territorial taxes, which vary by location. Below, we’ll break down the tax rates for 2024. 

Federal Income Tax Brackets

Federal income tax brackets for 2024 are:

• 15% on $55,867 or less, plus

• 20.5% on $55,868 to $111,733, plus

• 26% on $111,734 to $173,205, plus

• 29% on $173,206 to $246,752, plus

• 33% on more than $246,752, plus

For example, if you earn $80,000 per year, part of your income is taxed at 15%, and the rest falls into the 20.5% bracket. 

Provincial Income Tax Brackets

Here, you can find all the provincial income tax rates for 2024. Since most of our readers live in Ontario, BC, and Quebec, here are the tax rates for those provinces:

Ontario Tax Brackets:

• 5.05% on $51,446 or less, plus

• 9.15% on $51,446 to $102,894, plus 

• 11.16% on $102,894 to $150,000, plus 

• 12.16% on $150,000 to $220,000, plus

• 13.16% on more than $222,000

For example, someone earning $80,000 would pay about $23,233 in taxes. 

Quebec Tax Brackets:

• 14% on $51,780 or less, plus 

• 19% on $51,781 to $103,545, plus 

• 24% on $103,546 to $126,000, plus

• 25.75% on more than $126,000

For example, someone earning $80,000 would pay about $26,527 in taxes. 

BC Tax Brackets:

• 5.06% on $47,937 or less, plus

• 7.7% on $47,937 to $95,875, plus 

• 10.5% on $95,875 to $110,076, plus 

• 12.29% on $110,076 to $133,664, plus

• 14.7% on $133,664 to $181,232, plus

• 16.8% on $181,232 to $252, 752, plus

• 20.5% on $252,752

For example, someone earning $80,000 would pay about $21,000 in taxes. 

How to Calculate Your Income Tax in Canada 

It’s easier than you might think to calculate your income tax. Most online tax software will do this for you, but you can manually determine taxes on your income by following these steps:

1. Find your federal tax bracket and calculate your federal tax owed. 

2. Find your provincial tax bracket and calculate your provincial tax owed. 

3. Add both amounts together to determine your total tax. 

4. Find and apply tax credits (basic personal amount, deductions, etc.). 

For example, if you earn $100,000 in Ontario, your federal and Ontario tax would be calculated in different brackets, separately, then added together. 

Income Tax on Foreign Income in Canada 

If you earn income from outside Canada, you still need to report it to the CRA. However, tax treaties with some countries may reduce how much taxes you pay. There are different rules for residents and non-residents to declare foreign income in Canada. 

If you are a Canadian resident, you need to declare any income earned from outside the country. If you’ve paid tax outside of Canada for this income, you can claim it as a foreign tax credit. This is not a refundable tax credit, but it will reduce the taxes you pay in Canada. 

If you are a non-resident, you must declare your net income earned outside of the country on your tax return to take advantage of the non-refundable tax credits in Canada. This income will not be taxed, but it will affect how many credits you can claim. 

How Much Foreign Income Is Tax-Free in Canada?

You can earn up to $15,705 tax-free if you earned 90% or more of your income in Canada. If you earned more than 10% outside Canada, you won’t be able to earn any tax-free income up to a total amount of $15,705. 

When is the Income Tax Deadline in Canada?

The absolute last day to file your income taxes for the 2024 tax year is April 30, 2025. If you are self-employed, you have until June 16, 2025, but you must pay any taxes owing by April 30th. 

If you miss the deadline and file your income taxes late, you may be subject to late fees, penalties, and interest on your taxes owing. The late filing penalty is 5% of your 2024 balance owing, plus an additional 1% for every month you file after the due date, up to 12 months. The prescribed interest rates also apply. 

How to Reduce Your Taxes Owed 

The most common way of reducing how much taxes you owe or increasing your tax refund is credits and deductions. Here’s an overview of some of the most common ones that you might qualify for:

• Basic Personal Amount: Every Canadian can claim a non-refundable tax credit, which allows you to earn a certain amount of income tax-free. For the 2024 tax year, the federal amount is $15,705. 

• RRSP Contributions: Contributions to an RRSP are tax-deductible, reducing your taxable income for the year. The contribution limit for 2024 is 10% of your previous year’s earned income, up to a maximum of $31,560. 

• GST/HST Credit: This tax-free quarterly payment helps those with a lower income offset the GST/HST they pay. 

• Disability Tax Credit: This refundable tax credit helps those with disabilities reduce the amount of income tax they owe. 

• Canada Child Benefit: This tax-free monthly payment helps eligible families raise children under the age of 18. 

• Carbon Tax Rebate: This quarterly tax-free payment helps offset the cost of the federal carbon tax for residents of certain provinces. 

Don’t overlook any tax credits or deductions you can claim! All online income tax software will go through the rebates with you. 

Tools to Calculate and Pay Your Taxes Easily 

Income tax calculators, like the ones from Wealthsimple or TurboTax, can help you estimate your 2024 income after tax, tax refund, or taxes owed. 

Once you put in your details, like your annual income, province, and any tax deductions or credits you’re eligible for, these calculators can estimate your:

• Total tax payable 

• Net income after taxes

• Average and marginal tax rates

How to Get Rewarded for Paying Your Taxes 

Nobody has ever said that, right? You don’t get rewarded for paying your taxes… until now. 

Most people pay their taxes by direct debit or online banking, which doesn’t provide any rewards. Chexy Tax changes that by allowing you to pay your CRA taxes with a credit card, helping you:

• Earn Credit Card Rewards: Get points, cashback, or travel rewards on your tax payment. Tax payments from Chexy are classified as recurring payments, allowing you to earn higher rewards. For example, you can earn 4% cash back with the Scotia Momentum Visa Infinite Card instead of just 1%. 

• Have a Better Cash Flow: Delay your tax payment by one billing cycle by using your credit card, rather than paying it when filing your taxes (just make sure to pay it off in full by the due date so you don’t accrue any interest!). 

• Build Your Credit: Using your credit card responsibly (especially paying off a large amount) can help boost your credit score. 

Instead of paying your taxes and getting nothing in return, Chexy Tax lets you maximize your payment–turning a necessary expense into an opportunity to earn rewards. 

Just make sure the credit card you use to pay your taxes earns you more than 1.75% in rewards to offset the fees! 

Get started with Chexy today.

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