Tax season is around the corner once again, which means taxes are on our minds! Fidelity is here to explain the new 2023 tax brackets and provide some stress relief with an easy-to-understand refresher on how the Canadian tax system works for when you’re filing your 2022 return.
With more and more Canadians opting to file on their own, it’s becoming increasingly important to be tax-literate. Whether you choose to self-file, file with help or hand the task off to an expert, here are some basics that you’ll want to consider as you start filing your income taxes this year.
Know your sources of taxable income.
Firstly, you’ll want to think about your sources of taxable income. For some, this might be straightforward: employment income. But others may have multiple income streams that contribute to their overall taxable income. Common ones to consider include commissions, business and rental income, investment income (such as interest and dividends, as well as capital gains) and a variety of government benefits and pensions. A full list of income types can be found on the CRA website.
Know your eligibility for tax deductions and credits.
You can reduce the amount of income tax you owe via tax deductions and credits. Tax deductions lower your taxable income. Some examples of deductions include RRSP contributions, self-employment expenses, home office expenses, moving expenses and childcare expenses. Tax credits, on the other hand, reduce the amount of tax that you owe. Examples of tax credits include the basic personal exemption, qualifying medical expenses, the charitable tax credit for qualifying donations and gifts, the tuition tax credit and the Home Buyers’ Amount (HBA).
We’re just scratching the surface here; there is lengthy list of available tax deductions and credits that can be found on the CRA website. Think over the last year: what are some things you may be eligible to claim?
Important dates to keep in mind
- March 1, 2023: Deadline to contribute to an RRSP, a PRPP, or an SPP to deduct against your 2022 income.
- April 30, 2023 (extended to May 1, 2023, since April 30 is a Sunday): Deadline to file your return and pay your taxes.
- June 15, 2023: Extended deadline to file your return if you or your spouse or common-law partner are self-employed (note that payment must be made by April 30).
- Most individuals who have to pay tax instalments are required to pay by these payment due dates: March 15, June 15, September 15 and December 15.
Know the difference between your average and marginal tax bracket.
Canada uses a progressive tax system, meaning individuals pay higher rates of tax the higher their income gets. Every year, the federal and provincial governments determine the income ranges and the applicable tax rates for those ranges (the “tax brackets”). These tax brackets are reset each year, because they are adjusted upwards to account for inflation. Essentially, your income is divided into different brackets, and is taxed at higher rates the higher the income bracket.
Your marginal tax rate is the taxation rate on your last dollar of taxable income. Your average tax rate is calculated by dividing your total taxes paid by your total taxable income. Don’t forget: both the federal and provincial governments come out with their own tax brackets, so a bit of math is involved to calculate your average and marginal tax rates.
We have taken out the guesswork: Fidelity has a tax calculator tool that helps you easily calculate your average tax rate, total taxable income and year-end balance (or refund) based on your total income and total deductions.
2023 federal tax bracket rates
- 15% up to $53,359 of taxable income
- 20.5% between $53,359 and $106,717
- 26% between $106,717 and $165,430
- 29% between $165,430 up to $235,675
- 33% on any amount taxable income exceeding $235,675
2023 tax bracket rates by province
- 10% up to $142,292
- 12% between $142,292 and $170,751
- 13% between $170,751 and $227,668
- 14% between $227,668 and $341,502
- 15% on any taxable income exceeding $341,502
- 5.06% up to $45,654 of taxable income
- 7.7% between $45,654 and $91,310
- 10.5% between $91,310 and $104,835
- 12.29% between $104,835 and $127,299
- 14.7% between $127,299 and $172,602
- 16.8% on any amount exceeding $172,602 and $240,716
- 20.5% on any taxable income exceeding $240,716
- 10.8% up to $36,842 of taxable income
- 12.75% between $36,842 and $79,625
- 17.4% on any taxable income exceeding $79,625
- 9.4% up to $47,715 of taxable income
- 14% between $47,715 and $95,431
- 16% between $95,431 and $176,756
- 19.5% on any taxable income exceeding $176,756
Newfoundland and Labrador
- 8.7% up to $41,457 of taxable income
- 14.5% between $41,457 and $82,913
- 15.8% between $82,913 and $148,027
- 17.8% between $148,027 and $207,239
- 19.8% between $207,239 and $264,750
- 20.8% between $264,750 and $529,500
- 21.3% between $529,500 and $1,059,000
- 21.8% on any taxable income exceeding $1,059,000
- 8.79% up to $29,590 of taxable income
- 14.95% between $29,590 and $59,180
- 16.67% between $59,180 and $93,000
- 17.5% between $93,000 and $150,000
- 21% on any taxable income exceeding $150,000
- 5.05% up to $49,231 of taxable income
- 9.15% between $49,231 and $98,463
- 11.16% between $98,463 and $150,000
- 12.16% between $150,000 and $220,000
- 13.16% on any taxable income exceeding $220,000
Prince Edward Island
- 9.8% up to $31,984 of taxable income
- 13.8% between $31,984 and $63,969
- 16.7% on any taxable income exceeding $63,969
- 15% up to $49,275 of taxable income
- 20% between $49,275 and $98,540
- 24% between $98,540 and $119,910
- 25.75% on any taxable income exceeding $119,910
- 10.5% up to $49,720 of taxable income
- 12.5% between $49,720 and $142,058
- 14.5% on the amount over $142,058
2023 tax bracket rates – Territories
- 5.9% up to $48,326 of taxable income
- 8.6% between $48,326 and $96,655
- 12.2% between $96,655 and $157,139
- 14.05% on any taxable income exceeding $157,139
- 4% up to $50,877 of taxable income
- 7% between $50,877 and $101,754
- 9% between $101,754 and $165,429
- 11.5% on the amount over $165,429
- 6.4% up to $53,359 of taxable income
- 9% between $53,359 and $106,717
- 10.9% between $106,717 and $165,430
- 12.8% between $165,430 and $500,000
- 15% on any taxable income exceeding $500,000
Canadian income tax summary
We hope you’ve found this refresher guide helpful. Unsurprisingly, the consensus is that most Canadians wish they were paying less tax. As Canadians, we don’t determine the tax rates, but there are some adjustments we can make on our side that can help lower our tax obligations. The most common way to lower your tax bill is through RRSP contributions. Read here about RRSPs and how they work. You can also use our tax calculator, which illustrates your potential tax savings with varying RRSP contribution amounts. As tax planning is an important pillar of a solid financial plan, discuss with your financial advisor ways you can lower your income tax obligation that work with your overall financial plan.