How Income Tax Works in Canada in 2026: Federal, Provincial, CPP and EI
Canadians pay income tax twice: once to the federal government and once to their province or territory. Add the Canada Pension Plan (CPP) and Employment Insurance (EI) and a paycheque can look confusing. This guide explains what is taken from a salary in 2026 and walks through a worked example, using the figures behind our Canada salary calculator, which follows the Canada Revenue Agency’s published payroll formulas.
1. Federal income tax
Federal tax is progressive: each slice of income is taxed at its own rate. In 2026 the rates are:
| Taxable income | Federal rate |
|---|---|
| 0 to $58,523 | 14% |
| $58,523 to $117,045 | 20.5% |
| $117,045 to $181,440 | 26% |
| $181,440 to $258,482 | 29% |
| $258,482 and over | 33% |
Everyone gets a basic personal amount of $16,452, which works as a credit worth the lowest rate (14%) of that amount, so about $2,303 of tax is cancelled before you pay anything. The amount is reduced for incomes above $181,440. Credits also apply for CPP and EI contributions and the Canada employment amount.
2. Provincial and territorial income tax
Each province sets its own brackets, rates and credits. The lowest and highest rates range widely:
| Province | Lowest rate | Top rate | Top rate applies |
|---|---|---|---|
| Alberta | 8% | 15% | above $370,220 |
| British Columbia | 5.06% | 20.5% | above $265,545 |
| Manitoba | 10.8% | 17.4% | above $100,000 |
| New Brunswick | 9.4% | 19.5% | above $193,861 |
| Newfoundland and Labrador | 8.7% | 21.8% | above $1,141,275 |
| Northwest Territories | 5.9% | 14.05% | above $172,346 |
| Nova Scotia | 8.79% | 21% | above $157,124 |
| Nunavut | 4% | 11.5% | above $181,439 |
| Ontario | 5.05% | 13.16% | above $220,000 |
| Prince Edward Island | 9.5% | 19% | above $142,520 |
| Quebec | 14% | 25.75% | above $132,245 |
| Saskatchewan | 10.5% | 14.5% | above $155,805 |
| Yukon | 6.4% | 15% | above $500,000 |
Quebec runs its own tax system, collects its own return and gives residents a federal abatement of 16.5%. Ontario adds a surtax on higher provincial tax and an Ontario Health Premium of up to $900 a year, while several provinces give low-income reductions.
3. CPP and EI
Employees pay 4.95% to the CPP on earnings between $3,500 and the year’s maximum of $74,600, plus a further 1% enhancement that is a tax deduction, and 4% on earnings between $74,600 and $85,000. EI premiums are 1.63% of earnings up to $68,900 (1.3% in Quebec, which has its own parental insurance plan). Both stop once you reach the annual maximum.
A worked example: $80,000 in Ontario
| Item | Per year | Per month |
|---|---|---|
| Gross salary | $80,000 | $6,667 |
| Federal income tax | −$9,243 | −$770 |
| Ontario income tax | −$4,135 | −$345 |
| Ontario Health Premium | −$750 | −$63 |
| CPP | −$4,446 | −$371 |
| EI | −$1,123 | −$94 |
| Take-home pay | $60,303 | $5,025 |
Everything taken comes to $19,697, an overall rate of 24.6%. Income tax (federal, provincial and the health premium) is 72% of that; CPP and EI together cost the remaining $5,570.
Take-home pay on $80,000 in every province
Because each province sets its own tax, the same $80,000 salary leaves a different amount depending on where you live. The chart ranks every province and territory for a single employee in 2026.
Cutting the bill with an RRSP
An RRSP contribution is deducted from your taxable income. Put $5,000 into an RRSP and the same Ontario employee pays $18,215 in total tax instead of $19,697, a saving of $1,483. The money is not lost: it stays in your account, but it is locked in retirement savings and taxed again when you withdraw it. You can add an RRSP contribution, family status, age and the disability credit in the More Options panel of the calculator.
Marginal versus average rate
The overall rate of 24.6% is what you pay on average. Your marginal rate, the tax on your next dollar, is higher: at $80,000 in Ontario it is about 32%, made up of the 20.5% federal rate, Ontario’s 9.15% bracket and the second CPP contribution that applies above $74,600. It is the marginal rate that decides how much a bonus or an RRSP deduction is worth.
Enter your own salary and province to see your exact take-home pay. Try the calculator →
Frequently asked questions
How much tax do you pay on $80,000 in Ontario?
A single employee pays about $19,697 in total in 2026 ($1,641 a month), covering federal tax, Ontario tax and health premium, CPP and EI. That is 24.6% of gross pay and leaves $60,303 a year.
What is the difference between federal and provincial tax?
You pay both. Federal tax follows the same brackets in every province, while each province or territory sets its own brackets, rates and credits on top. Quebec collects its own provincial tax and runs its own pension plan.
Do CPP and EI stop during the year?
Yes. Both are charged only up to a yearly maximum, so your take-home pay per paycheque rises once you pass the limits, typically late in the year for higher earners.
How much does an RRSP contribution save?
On $80,000 in Ontario, putting $5,000 into an RRSP cuts the tax bill by $1,483. The saving is your marginal rate on the contributed amount, and the money is taxed again when you withdraw it in retirement.
Sources
- Canada Revenue Agency, T4127 Payroll Deductions Formulas (122nd edition)
- CRA forms TD1 and provincial TD1 forms 2026
- Revenu Quebec
Figures are estimates for a single employee and are updated each tax year. This article is general information, not tax advice.