Updated: April 2025  |  bremo.io financial guides

Canada Tax Brackets 2025

Canada uses a progressive income tax system at both the federal and provincial/territorial levels. This means higher portions of income are taxed at higher rates — but only the income within each bracket is taxed at that bracket's rate. Understanding tax brackets helps you plan contributions, withdrawals, and other financial decisions to minimize what you owe.

How Progressive Tax Brackets Work

A common misconception is that earning more money puts all your income in a higher bracket. In reality, only the income above the threshold is taxed at the higher rate. If your taxable income is $60,000, you pay 15% on the first $57,375 (approximately) and 20.5% only on the $2,625 above that threshold.

Federal Tax Brackets 2025

The federal income tax brackets are adjusted annually for inflation (called indexation). For the 2025 tax year:

• 15% on the first $57,375 of taxable income
• 20.5% on $57,375 to $114,750
• 26% on $114,750 to $158,519
• 29% on $158,519 to $220,000
• 33% on taxable income over $220,000

Note: The basic personal amount reduces the tax on the first ~$16,129 (2025 estimate) of income to zero at the federal level.

Provincial Tax Brackets (Overview)

Each province and territory has its own additional tax brackets applied on top of federal tax. Combined federal plus provincial marginal rates vary significantly by province and income level.

Ontario Combined Marginal Rates (Approximate)

• Up to $51,446: ~20.1%
• $51,446 to $102,894: ~29.65%
• $102,894 to $150,000: ~43.41%
• $150,000 to $220,000: ~46.41%
• Over $220,000: ~53.53%

British Columbia Combined Marginal Rates (Approximate)

• Up to $45,654: ~20.06%
• $45,654 to $91,310: ~28.20%
• $91,310 to $104,835: ~40.70%
• Over $240,716: ~53.50%

Alberta Combined Marginal Rates (Approximate)

• Up to $148,269: ~25%
• $148,269 to $177,922: ~30.5%
• Over $341,988: ~48%

Alberta has no provincial surtax and generally has lower combined rates than other large provinces.

Capital Gains Tax Rates

Capital gains are included in income at a 50% inclusion rate (for most taxpayers on gains under $250,000 annually). This means 50% of your capital gain is added to your income and taxed at your marginal rate. For gains above $250,000 annually, the inclusion rate increases to 66.67% (as proposed in the 2024 federal budget).

Dividend Tax Rates

Canadian dividends receive preferential treatment through the dividend tax credit. Eligible dividends (from large Canadian corporations) and non-eligible dividends (from Canadian-controlled private corporations) are both grossed up and then reduced by the dividend tax credit, resulting in effective rates lower than equivalent interest income.

Strategies to Lower Your Marginal Rate

• RRSP contributions — The most direct way to reduce taxable income, especially effective in top brackets
• Pension income splitting — Transfer up to 50% of eligible pension income to a lower-income spouse
• Income deferral — Defer bonuses or self-employment income to a lower-income year
• Capital loss harvesting — Realize investment losses to offset capital gains
• Charitable giving — Large donations generate significant tax credits