The Canadian federal income tax applies to every individual resident in Canada. The Canada Revenue Agency (CRA) administers federal tax under the Income Tax Act (ITA), using a graduated bracket system in which higher income is taxed at progressively higher rates. The tax is assessed on taxable income, which is net income minus specific deductions such as RRSP contributions, union dues, and moving expenses.
The calculator above computes federal tax only. Each province and territory levies its own additional income tax on top of the federal amount. Combined federal-provincial calculators for BC, Alberta, Ontario, Quebec, Manitoba, Saskatchewan, Nova Scotia, and other provinces are available from the tools menu.
Quick Answer
For 2026, a single individual earning $85,000 in taxable income owes approximately $14,015 in federal income tax before any credits other than the Basic Personal Amount (BPA) of $16,452. The effective federal tax rate on $85,000 is about 16.5%. The marginal federal rate at that income is 20.5%.
2026 Federal Tax Brackets
| Taxable income | Federal rate |
|---|---|
| $0 to $58,523 | 14% |
| $58,524 to $117,045 | 20.5% |
| $117,046 to $181,440 | 26% |
| $181,441 to $258,482 | 29% |
| Over $258,482 | 33% |
The 14% rate on the first bracket reflects the reduction from 15% to 14% that took effect July 1, 2025 under the 2024 federal budget. Brackets are indexed to inflation annually using the All-Items CPI.
Basic Personal Amount
Every resident claims the Basic Personal Amount (BPA) as a non-refundable credit. For 2026, the BPA is $16,452 for most taxpayers. The credit is calculated at the lowest marginal rate: $16,452 x 14% = $2,303.28 of federal tax savings. This means the first $16,452 of income is effectively untaxed at the federal level.
High-income taxpayers face a reduced BPA. The BPA phases out linearly from $181,440 to $258,482, reaching a floor of approximately $14,829 at the top of that range. The phase-out reduces the BPA by about $2.10 for every $1,000 of income above $181,440.
How Federal Tax Is Calculated
- Start with gross income from all sources (employment, self-employment, investments, pension).
- Subtract above-the-line deductions (RRSP, union dues, business expenses, moving costs) to arrive at net income.
- Subtract additional deductions if applicable (losses from prior years, etc.) to arrive at taxable income.
- Apply the bracket table to taxable income to calculate gross federal tax.
- Subtract non-refundable credits (BPA, CPP/EI credits, charitable donations, medical expenses, disability, tuition) from gross federal tax.
- Add refundable credits (Canada Workers Benefit, GST/HST credit) to receive any net refunds.
Worked Example
An employee in Ontario earns $120,000 gross salary in 2026. After an RRSP deduction of $15,000 and union dues of $1,200, taxable income is $103,800.
- Federal tax on first $58,523: $58,523 x 14% = $8,193.22
- Federal tax on $58,524 to $103,800: ($103,800 – $58,523) x 20.5% = $9,281.79
- Gross federal tax: $17,475.01
- BPA credit: $16,452 x 14% = $2,303.28
- CPP contribution credit (approx. $3,867 x 14%): $541.38
- EI premium credit (approx. $1,049 x 14%): $146.86
- Net federal tax: $17,475.01 – $2,303.28 – $541.38 – $146.86 = $14,483.49
Ontario provincial tax, health premium, and surtax are calculated separately on the same $103,800 taxable income using Ontario’s bracket table.
Federal Tax Credits
Beyond the BPA, other common non-refundable federal credits for 2026 include:
| Credit | Maximum amount | Credit rate |
|---|---|---|
| CPP contributions (employee) | $3,867 | 14% |
| EI premiums | $1,049 | 14% |
| Age amount (age 65+) | $8,790 (reduced above $44,325) | 14% |
| Disability amount | $10,138 | 14% |
| Charitable donations (over $200) | Unlimited | 29–33% |
| Canada Caregiver Credit | Up to $2,616 | 14% |
Quebec Abatement
Quebec residents receive a 16.5% federal abatement that reduces their basic federal tax. This exists because Quebec administers and funds its own social programs that federal transfers would otherwise support elsewhere. Quebec residents pay less net federal tax and more provincial Quebec tax as a result. The abatement is not a credit against the bracket tax; it is a reduction of the gross federal tax before other credits are applied.
Alternative Minimum Tax
The federal Alternative Minimum Tax (AMT) applies a flat 20.5% rate to an adjusted income base (beginning 2024, increased from 15%). Taxpayers with large tax shelters, capital gains, or significant deductions may owe AMT if it exceeds their regular federal tax. AMT paid can be carried forward 7 years and applied against regular tax in a year when regular tax exceeds AMT.
Edge Cases and Rules
- Bracket amounts and BPA are indexed each January 1 to the federal CPI adjustment factor.
- Part-year residents pay federal tax only on income earned during the Canadian residency period. Non-residents pay tax on Canadian-source income at non-resident withholding rates (usually 25%, reduced by treaty).
- The dividend gross-up and federal dividend tax credit system modifies the effective tax rate on eligible and non-eligible Canadian dividends relative to the nominal bracket rates.
- Capital gains are taxable at a 50% inclusion rate for amounts below $250,000 per year (for individuals), and at a 66.67% inclusion rate above $250,000 per year, effective June 25, 2024.
Frequently asked questions
- What are the federal income tax brackets for 2026?
- The 2026 federal brackets are: 14% on income up to $58,523; 20.5% from $58,524 to $117,045; 26% from $117,046 to $181,440; 29% from $181,441 to $258,482; and 33% on income above $258,482.
- What is the Basic Personal Amount for 2026?
- The Basic Personal Amount (BPA) is $16,452 for 2026 for most taxpayers. It is a non-refundable credit calculated at the 14% lowest bracket rate, producing a credit of $2,303.28 that reduces federal tax. The BPA phases out for incomes between $181,440 and $258,482.
- What is the difference between federal tax and provincial tax?
- Federal income tax is levied by the Government of Canada and is the same bracket system for all provinces except Quebec (which receives an abatement). Provincial income tax is levied separately by each province or territory at its own rates and brackets. Together, they form the combined rate. Ontario's top combined rate for 2026 is 53.53%.
- Why did the lowest federal bracket drop from 15% to 14%?
- The 2024 federal budget reduced the lowest federal bracket from 15% to 14%, effective July 1, 2025. The reduction was applied as an annualized 14.5% rate for 2025 (half-year at 15%, half-year at 14%), and the full 14% rate takes effect for the 2026 tax year.
- What is the marginal vs effective federal tax rate?
- The marginal rate is the rate applied to the last dollar of taxable income (for example, 20.5% for income between $58,523 and $117,045). The effective rate is total federal tax divided by taxable income. Someone with $85,000 taxable income pays about 16.5% effective rate and has a 20.5% marginal rate.
- Do I pay federal tax on RRSP contributions?
- No. RRSP contributions are deducted from income before calculating taxable income. The tax is deferred: RRSP withdrawals are taxable as income in the year of withdrawal. The tax benefit of an RRSP contribution depends on your marginal rate at contribution versus your rate at withdrawal.
- How are capital gains taxed at the federal level?
- As of June 25, 2024, 50% of capital gains below $250,000 per year are included in taxable income (for individuals), and 66.67% of capital gains above $250,000 per year are included. The included amount is taxed at your marginal bracket rate, not at a flat capital gains rate.
- What is the federal dividend tax credit?
- Dividends from Canadian corporations receive preferential tax treatment through the gross-up and dividend tax credit mechanism. Eligible dividends (from large corporations) are grossed up by 38% and then receive a 15.02% federal dividend tax credit. Non-eligible dividends are grossed up by 15% and receive a 9.03% credit. This reduces the effective rate compared to ordinary income.
- What is the Alternative Minimum Tax (AMT)?
- The AMT ensures high-income taxpayers with large deductions pay a minimum amount of federal tax. For 2024 and later, the AMT rate is 20.5% applied to an adjusted minimum tax income base that adds back many deductions and shelter items. AMT paid can be carried forward 7 years and applied against regular tax.
- How does the Quebec abatement affect federal tax?
- Quebec residents receive a 16.5% reduction on their basic federal tax, called the Quebec abatement, because Quebec independently administers social programs that the federal government transfers to other provinces. Quebec residents pay less federal tax but more provincial Quebec tax than residents of other provinces with the same income.
- What is the non-resident withholding rate on Canadian income?
- Non-residents pay a 25% withholding tax on most Canadian income (dividends, rents, pension income, royalties). Tax treaties with many countries reduce this rate — often to 15% for dividends and 0-15% for pension income, depending on the treaty. Employment income earned in Canada by non-residents is taxed at graduated rates.