Tax Rates -> Personal Income Tax Rates for 2005 and 2006

Personal Income Tax Rates for Canada and Provinces/Territories for 2005 and 2006

See also Current Marginal Tax Rates.

1.    Canadian income tax rates - federal personal income tax rates:

Canadian federal income tax is calculated based on taxable income, then non-refundable tax credits are deducted to determine the net amount payable.  For 2006, every taxpayer can earn taxable income of $9,039 ($8,648 for 2005) before paying any federal tax. 

The basic personal tax credit is calculated by multiplying the lowest tax rate by the basic personal amount.  The 2006 tax credit is 15% x $9,039 = $1,356 (2005 is 15% x $8,648 = $1,297).

The Department of Finance announced in November 2005 that the lowest federal tax rate would be reduced from 16% to 15%, and certain tax credits would be revised to compensate for the lower tax rates.  The revised rates are being used on 2005 personal income tax returns provided by Canada Revenue Agency (CRA).  The tables below have been revised to include the 15% tax rate and the basic personal exemption amount increase.

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2.    Combined Federal + Provincial/Territorial Personal Income Tax Rates

Canadian federal and provincial/territorial income taxes are calculated separately, although on the same tax return, except for Quebec.  The rates are combined here so that taxpayers can see the total tax rate being paid, including any provincial surtaxes.  The 2005 rates have been revised to include the federal tax rate change announced in November 2005.

The combined tax rates in these tables are marginal tax rates, including any provincial surtaxes.  In the tables, "other income" includes income from employment, self-employment, interest from Canadian or foreign sources, foreign dividend income, etc.  The tax rates shown for capital gains and Canadian dividends are the rates that would be paid on the next dollar of actual capital gains or actual Canadian dividends earned, including any provincial surtaxes.

There are an abundance of tax brackets when the federal and provincial tax tables are combined, because almost all the tax brackets for the provinces and territories differ from the federal ones.

After the income tax amounts are calculated, non-refundable tax credits are deducted from the tax payable.  Non-refundable tax credits include the basic personal amount, which is available to every taxpayer.  See the tables of non-refundable tax credits for more information, including federal and provincial/territorial credits. 

The basic personal amount for each province and territory is listed below the tables of tax rates.  This is the amount that can be earned before any provincial/territorial tax is paid.

Surtax

NL has a surtax of 9% which is included in the above rates.  The surtax applies when the NL income tax (after deducting non-refundable tax credits) exceeds $7,032.  If provincial income tax payable after tax credits was $10,000, the surtax would be $267, or ($10,000 - $7,032) x 9%.  For a single person with a tax credit for only the basic personal amount, the provincial income tax will reach $7,032 at a taxable income of $58,597 in 2006 or 2005.

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Surtax

PE has a surtax of 10% which is included in all the above rates.  The surtax applies when the PE income tax (after deducting non-refundable tax credits) exceeds $5,200.  If provincial income tax after tax credits was $10,000, the surtax would be $480, or ($10,000 - 5,200) x 10%.  For a single person with a tax credit for only the basic personal amount, the provincial income tax will reach $5,200 at a taxable income of $51,858 in 2006 or 2005.

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Surtax

NS has a surtax of 10%, which is included in all the above rates.  The surtax applies when the NS income tax (after deducting non-refundable tax credits) exceeds $10,000.  If provincial income tax after tax credits was $12,000, the surtax would be $200, or ($12,000 - $10,000) x 10%.  This surtax applies to both 2005 and 2004.  For a single person with a tax credit for only the basic personal amount, the provincial income tax will reach $10,000 at a taxable income of $80,840 in 2006 and 2005.

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Most Quebec taxpayers also get a federal tax abatement (reduction) of 16.5% of basic federal tax, which has been included in all of the above rates.

Unlike other provinces and territories, QC does not apply the lowest provincial tax rate (16%) to the basic personal amount in calculating the non-refundable tax credits.

Quebec has two different tax systems for filing personal tax returns.  The dividend tax credit is not available to taxpayers filing a simplified return.

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Surtaxes

ON has two surtaxes, which are included in the above tax rates:
    1. a surtax of 20% of ON income tax (after deducting non-refundable tax credits) in excess of $4,016 in 2006 ($3,929 in 2005).  For a single person with a tax credit for only the basic personal amount, the ON tax will reach $4,016 at a taxable income of $61,206 in 2006 and will reach $3,929 at a taxable income of $59,880 in 2005.
    2. a surtax of 36% of ON income tax (after deducting non-refundable tax credits) in excess of $5,065 in 2006 ($4,957 in 2005).  For a single person with a tax credit for only the basic personal amount, the ON tax will reach $5,065  at a taxable income of $72,102 in 2006 and will reach $4,957  at a taxable income of $70,560 in 2005.

Note that the second surtax of 36% of ON income tax is in addition to the first surtax of 20%.  The surtax of 20% applies to ON income tax in excess of $4,016 but less than $5,065, and both surtaxes, for a total of 56%, apply to ON income tax in excess of $5,065.

Ontario Health Premium

Beginning July 1, 2004, the Ontario government started collecting, through the income tax system, an Ontario Health Premium that is based on an individual's taxable income.

Marginal tax rates above do not include the Ontario Health Premium, which increases the above rates by up to 1.2%

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Alberta Tax-free Resource Rebate

In January 2006 qualified Albertans will receive a tax-free payment of $400.  In order to qualify:

There is a deadline of December 31, 2006 for filing the 2004 tax return or registering for the Canada Child Tax Benefit in order to qualify for the rebate.

Alberta Health Care Insurance Plan

Alberta charges health care insurance plan premiums, for which a subsidy is available based on the prior year taxable income.  The regular annual premiums are:

Effective October 1, 2004, seniors at all income levels are exempt from Alberta health care insurance premiums.

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BC medical services plan

BC charges a Medical Services Plan (MSP) premium.  There is premium assistance available, based on adjusted net income for the 2 preceding tax years for an individual or couple, but the premium is not collected through the income tax system.  The premium for many employees is paid, in part or in full, by their employers directly to the government.  Non-employees are billed directly by MSP.

Adjusted net income is calculated by taking combined net income for tax purposes for the previous tax year, and making the following deductions:

 Thus, a couple who are both over 65 years of age would qualify for reduced premiums with combined net income before adjustments of $37,000 or less ($33,000 or less prior to July 1, 2005).

The Feb 15, 2005 BC Budget announced increased thresholds for Medical Services Plan premium assistance, effective July 1, 2005.

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Surtax

YT has a surtax of 5%, which is included in the above rates.  The surtax applies when the YT income tax (after deducting non-refundable tax credits) exceeds $6,000.  If YT income tax after tax credits was $8,000, the surtax would be $100, or ($8,000 - 6,000) x 5%.  This surtax applies to both 2006 and 2005.  For a single person with a tax credit for only the basic personal amount, the YT income tax will reach $6,000 at a taxable income of $77,161 in 2006 ($76,628 in 2005).

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Revised: October 26, 2023