Canada Income Tax 2026: Brackets, Rates, and What You'll Actually Pay

How Canadian income tax works

Your income tax is calculated in two parallel systems. The federal government taxes your taxable income on one bracket schedule; your province or territory taxes the same income on its own schedule. Both layers use the Basic Personal Amount to shelter a first slice of income, and both are progressive: higher rates apply only to income above each threshold.

On top of income tax, most workers pay Canada Pension Plan (CPP) contributions and Employment Insurance (EI) premiums. Quebec residents instead contribute to the Quebec Pension Plan (QPP) and the Quebec Parental Insurance Plan (QPIP), and receive a federal abatement that reduces their federal tax.

Federal brackets for 2026

For 2026, the federal bottom rate is 14% (down from 15%), applied to the first $58,523 of taxable income. The full federal schedule is:

• 14% on the first $58,523
• 20.5% from $58,523 to $117,045
• 26% from $117,045 to $181,440
• 29% from $181,440 to $258,482
• 33% above $258,482

These thresholds were indexed by 2.0% from 2025. Remember that the 33% top rate applies only to the portion of income above $258,482, not to your entire income.

The Basic Personal Amount

The federal Basic Personal Amount (BPA) for 2026 is $16,452. It is a non-refundable credit calculated at the 14% bottom rate, worth up to about $2,303, which means you pay no federal tax on roughly the first $16,452 of income. The enhanced portion of the BPA phases out for high earners between $181,440 and $258,482 of income, falling to a base of $14,829.

Provincial and territorial tax

Each province and territory sets its own brackets, rates, and Basic Personal Amount, so your combined rate depends heavily on where you live. Some provinces add wrinkles: Ontario levies a surtax on higher provincial tax bills, and British Columbia offers a low-income tax reduction. Our per-province pages show the exact 2026 schedule for each jurisdiction.

CPP, CPP2, and EI

CPP contributions apply to earnings between the $3,500 basic exemption and the first ceiling (YMPE) of $74,600. A second tier, CPP2, applies a further 4% on earnings between $74,600 and the second ceiling (YAMPE) of $85,000. EI premiums apply at 1.64% on insurable earnings up to $65,700 (Quebec residents pay a reduced 1.31% because QPIP covers parental benefits).

Marginal vs average rate

Your marginal rate is the tax on your next dollar of income, the combined federal-plus-provincial rate of your top bracket. Your average rate is total tax divided by total income, and it is always lower, because most of your income is taxed in lower brackets. Marginal rate is what matters for decisions like an RRSP contribution; average rate is what matters for your overall tax burden.

Capital gains

Only a portion of a capital gain is taxable. Under the current 1/2 inclusion rate, half of a gain is added to your taxable income and taxed at your marginal rate. A proposal to raise the inclusion rate to 2/3 on gains above $250,000 remains legislatively uncertain, so this guide and our calculator use the 1/2 rate.

Estimate your own tax

The fastest way to see what you will actually pay is to run your numbers through the 2026 income tax calculator. It applies everything in this guide, including the Ontario surtax, the Quebec abatement, and CPP2, and updates as you type.