How Canadian Income Tax Works (2025)
Canada uses a progressive tax system at both the federal and provincial levels. Federal income tax rates are the same across all provinces; provincial rates vary significantly. Your total income tax is the sum of federal tax and provincial tax calculated on the same taxable income.
The Basic Personal Amount
Every Canadian resident can earn a basic personal amount before paying federal income tax. For 2025, this is $16,129 (full amount for those earning under $177,882; phases out between $177,882 and $253,414). Each province also has its own basic personal amount. These amounts reduce your taxable income for rate calculation purposes.
CPP and EI Contributions
Both CPP and EI are mandatory payroll deductions. CPP contributions earn you pension credits for retirement. EI premiums make you eligible for benefits if you lose your job, go on parental leave, or become ill. Employers pay 1.4× your EI premium and match your CPP contribution, making your total compensation cost higher than your gross pay.
Provincial Tax Differences
Provincial taxes vary significantly. Alberta has the lowest provincial income tax (a flat 10% on income above $148,269, with 8% below). Quebec has the highest marginal rate. Ontario, BC and Manitoba fall in the middle range. This means the same $100,000 salary can result in meaningfully different take-home pay depending on which province you live in.
Frequently Asked Questions
What are Canada's federal income tax rates for 2025?
Federal rates for 2025: 15% on the first $57,375, 20.5% on $57,376–$114,750, 26% on $114,751–$177,882, 29% on $177,883–$253,414, and 33% on income over $253,414. Each province also levies its own income tax — Ontario, British Columbia and Quebec are the largest provinces and have their own progressive rate schedules.
What is CPP?
CPP (Canada Pension Plan) is a mandatory government pension contribution. For 2025, employees contribute 5.95% on earnings between $3,500 and $68,500 — maximum employee contribution of approximately $3,867. There is also a second earnings ceiling (CPP2) from $68,500 to $73,200, with an additional 4% rate. Employers match employee CPP contributions.
What is EI in Canada?
Employment Insurance (EI) is mandatory insurance providing income support during periods of unemployment, parental leave or illness. The 2025 employee rate is 1.64% on insurable earnings up to a maximum of $65,700 — maximum annual premium of approximately $1,077. Quebec residents pay a lower EI rate because they pay into the Quebec Parental Insurance Plan (QPIP) instead.
How much is taken off my paycheque in Canada?
Deductions depend on your province and income level. On a $70,000 salary in Ontario, you typically pay approximately $10,000–12,000 in federal and provincial income tax, $3,400 in CPP, and $1,000 in EI — totalling around $14,400–16,400 in deductions, giving a take-home of approximately $53,600–$55,600.
Does Quebec have different taxes?
Yes — Quebec has the most complex provincial tax system in Canada. Quebec residents file a separate provincial tax return (in addition to the federal return) with the Revenu Québec agency. Quebec has its own marginal rates (currently 14%, 19%, 24%, 25.75%), its own QPP (Quebec Pension Plan) instead of CPP, and its own parental insurance plan (QPIP).