How Taxes are Withheld in Canada (CRA)
Every paycheck in Canada is subject to both Federal and Provincial statutory deductions:
- CRA Federal Tax (15% to 33%): The Federal government allows a Basic Personal Amount ($15,705) before marginal tax rates take effect.
- Provincial Tax: Each province sets independent tax brackets. Ontario brackets start at 5.05%, British Columbia at 5.06%, and Alberta at a flat 10% on the first tier.
- Canada Pension Plan (CPP): Employees contribute 5.95% of pensionable earnings above the $3,500 basic exemption, up to the annual maximum ($3,867).
- Employment Insurance (EI): Employees pay 1.66% on insurable earnings up to the annual maximum ($1,049).
Frequently Asked Questions
How do RRSP contributions lower Canadian taxes?
Contributions to a Registered Retirement Savings Plan (RRSP) are 100% tax-deductible against your income. If you are in a 30% combined tax bracket and deposit $5,000 into your RRSP, you reduce your tax bill by $1,500.
Do bonuses get taxed higher in Canada?
No, but they may have higher upfront payroll withholding. Payroll software calculates bonus tax assuming that single check represents your recurring annual salary. Any excess tax withheld is refunded when you file your T1 tax return with the CRA.