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Federal income tax for 2026 runs from 14% to 33% across five brackets, and the 14% rate covers your first $58,523 of taxable income. Only the slice of income inside each bracket is taxed at that bracket’s rate, so a raise never lowers your take-home pay.
What are the federal tax brackets for 2026?
Here’s the schedule as the CRA publishes it. The thresholds rise with inflation each year, and the federal indexing factor for 2026 is 2.0%.
| Taxable income | Rate on that slice |
|---|---|
| Up to $58,523 | 14% |
| $58,523 to $117,045 | 20.5% |
| $117,045 to $181,440 | 26% |
| $181,440 to $258,482 | 29% |
| Over $258,482 | 33% |
Your province adds its own tax on top, using its own brackets. So the federal figure is never the whole bill, and if you only looked at it you’d underestimate what leaves your pay, sometimes by a lot.
How is federal income tax worked out?
Take the taxable income, apply each rate to its slice, then subtract non-refundable credits. Say your taxable income is $100,000. The first $58,523 at 14% is $8,193. The next $41,477 at 20.5% is $8,503. That’s $16,696 before credits. Our income tax calculator shows about $14,390 once the basic personal amount credit is taken off.
Being in the 20.5% bracket doesn’t mean 20.5% of everything. It means the last dollars. That last-dollar rate is the one that matters when you’re weighing an RRSP deduction, some overtime or a side job, and the marginal tax rate calculator adds the provincial layer for you.
What does the federal share look like on a real salary?
Take an Ontario employee on $60,000. Federal tax comes to about $5,338 and Ontario’s share to about $2,982, so the federal government takes roughly 64% of the income tax bill. Federal is about 8.9% of gross pay, and the combined income tax is about 13.9%.
On $85,000, federal tax is about $10,227 and Ontario’s about $5,324. The federal share creeps up as the 20.5% bracket comes into play.
These figures include the credits for CPP and EI you pay on employment income, and the Canada employment amount. Someone with different credits will land a little differently.
Short version: know your bracket, but know your average rate too.
Which credits reduce federal income tax?
Every filer gets a basic personal amount, and it works as a credit at the lowest rate, not as a deduction. On top come credits people claim, such as the age amount and the disability amount. The tax credits calculator estimates the federal ones. It doesn’t do provincial credits, so add those yourself.
The amounts move each year with indexation, so use the current figures from the CRA rather than a table from an old return.
Where do people get federal income tax wrong?
Mixing up the brackets with a flat rate is the big one. Another is forgetting that RRSP deductions come off before the brackets apply, which makes them worth the most to people at the top of a bracket.
Where you live matters too. Quebec has its own system, so a Quebec return isn’t a copy of an Ontario one, and our federal examples here use Ontario.
And dividends and capital gains follow different rules. For those, use the dividend tax calculator or the capital gains tax calculator. The capital gains inclusion rate we use is 50%, and we couldn’t confirm that figure on a page, so check it before relying on it.
Where do the numbers come from?
Brackets, rates and the 2026 indexing factor are from the Canada Revenue Agency’s current year tax rates page. Worked examples use our calculators, which apply the 2026 federal and Ontario rates. They’re estimates and not a CRA assessment.
Frequently asked questions
What is the lowest federal income tax rate in 2026?
14%, applied to the first $58,523 of taxable income.
Is the federal rate applied to all of my income?
No. Each rate applies only to the slice of income inside its bracket.
Do I also pay provincial income tax?
Yes, on top of the federal tax, with the province's own rates and brackets.
How much did the brackets rise for 2026?
The CRA lists the federal indexing factor for January 1, 2026 as 2.0%.
Is a deduction or a credit worth more?
A deduction is worth your marginal rate, so it's worth most at higher incomes. A non-refundable credit is worth its amount at the lowest rate, whatever your income.
- How Canadian income tax works: brackets and credits
How federal and provincial Canadian income tax stack up, what marginal and average rates mean, and how credits and deductions change your bill
Information only. This page is general information, not tax, legal or accounting advice. Tax-Services.ca is an independent publisher: we don't prepare or file tax returns or offer tax services, and we have no connection with the CRA, Revenu Québec, any government or any company named on this page. Check the figures that matter with an official source or a qualified professional.