Income tax brackets in Canada (2026): your bracket isn’t your rate

What a tax bracket actually is

A tax bracket is a slice of taxable income with its own rate. Canada uses progressive tax, so each rate applies only to the income inside its slice. Moving into a higher bracket never taxes your earlier dollars at the higher rate.

That is the idea behind every income tax brackets Canada table. The CRA says it plainly: each rate applies only to the corresponding income bracket, not to all income.

The most common worry is that a raise will push you into a higher bracket and shrink your pay. It can’t. Say your taxable income goes from $58,000 to $60,000 in 2026. The first $523 of the raise is taxed at 14% and the remaining $1,477 at 20.5%. That is about $376 of extra federal tax, so you keep about $1,624 of the $2,000.

What are the federal tax brackets for 2026?

There are five federal brackets for 2026. The rate starts at 14% and rises to 33% on taxable income above $258,482. These are the CRA’s figures for income earned in 2026, to be reported on the return you file in 2027.

The thresholds rise with inflation every year. The CRA’s 2026 indexation factor is 2.0%, which is why the brackets above are higher than the 2025 ones.

The brackets apply to taxable income, which is what is left after deductions such as RRSP and FHSA contributions.

Marginal vs average tax rate: what will I pay?

Your marginal rate is the rate on your next dollar. Your average rate is total tax divided by income. If you want to know how much tax you will pay, you want the average rate, and it is always lower than your top bracket.

Here is the 2026 federal tax on $85,000 of taxable income, slice by slice. This example ignores every credit, including the basic personal amount, and ignores provincial tax, CPP and EI.

• Marginal rate: 20.5%. The next dollar you earn is taxed at that rate.
• Average rate: $13,621.01 ÷ $85,000 = 16.0%.
• The gap: 4.5 percentage points, because the first $58,523 was taxed at only 14%.

Add a province and the gap persists. Using Ontario’s 2026 rates, the first $53,891 is taxed at 5.05% and the rest of $85,000 at 9.15%. That is $2,721.50 plus $2,846.47, or $5,567.97. Federal and Ontario together come to about $19,189, an average of 22.6%, with a marginal rate of 29.65% (20.5% plus 9.15%).

The marginal rate is the number to use when you are weighing one extra dollar. That covers a bonus, side income, a capital gain or a deduction. For almost every other question, the average rate is the honest answer.

What are the provincial and territorial tax brackets?

Each province and territory sets its own brackets, and the amounts below are added to the federal tax. This table shows the lowest and highest rate in each jurisdiction for 2026, taken from the CRA’s current-year page.

Nunavut starts lowest at 4%, then Ontario at 5.05%, British Columbia at 5.6% and the Northwest Territories at 5.9%. Newfoundland and Labrador has the highest top rate at 21.8%, while Nunavut has the lowest at 11.5%.

Ontario in full, for readers who want every bracket.

Two notes on the details. Ontario also has a surtax and the Ontario Health Premium, which sit outside the bracket rates above. Alberta’s lowest bracket, 8%, was added on July 1, 2025, according to the CRA’s 2025 page.

What is the basic personal amount?

The basic personal amount is the slice of income you can earn before federal income tax applies. For 2026 it is up to $16,452. It works as a tax credit that every filer can claim, not a deduction from income.

Higher earners get less. The 2026 amount is the full $16,452 if your net income is $181,440 or lower. It drops gradually between $181,440 and $258,482, and settles at $14,829 once net income reaches $258,482 or more.

Provinces and territories have their own basic personal amounts too. Because the federal credit shrinks as income rises, it adds a little to the tax on each extra dollar across that range.

How do RRSP and FHSA deductions lower your tax?

An RRSP or FHSA contribution is deducted from income, so it lowers your taxable income dollar for dollar. The tax you save is the contribution times your marginal rate. That is why the bracket you are in matters more here than your average rate.

Take the $85,000 example. A $5,000 RRSP deduction brings taxable income to $80,000 and federal tax to about $12,596, which is $1,025 less. Ontario’s 9.15% saves another $457.50. Together that is $1,482.50, or 29.65% of the contribution.

The 2026 RRSP dollar limit is $33,810, and your own deduction limit is on your notice of assessment. The FHSA allows $8,000 a year and $40,000 over a lifetime, and contributions are deductible. Unclaimed deductions can be carried forward to a year with a higher marginal rate.

Did the federal rate change in 2025?

Yes. The lowest federal rate fell from 15% to 14% on July 1, 2025, so the CRA applies 14.5% to the first bracket for the whole of 2025. From 2026 the rate is a clean 14%. The 2025 first bracket runs $0 to $57,375 at 14.5%, then 20.5% to $114,750, 26% to $177,882, 29% to $253,414 and 33% above.

This matters if you are filing a late 2025 return, amending one or checking a notice of assessment. Use the 2025 table for those. The CRA’s current-year page shows only 2026 figures, so a reader who lands there will not see the mid-year change.