1. What is Canadian Income Tax?

Canadian income tax consists of federal and provincial taxes, plus mandatory contributions to the Canada Pension Plan (CPP) and Employment Insurance (EI). The tax system is progressive, meaning higher income is taxed at higher rates.

2. How Does the Calculator Work?

The calculator uses the following formula:

Where:

• Federal Tax — Calculated using progressive tax brackets
• Provincial Tax — Varies by province, also progressive
• CPP — Canada Pension Plan contribution (5.95% up to maximum)
• EI — Employment Insurance premium (1.63% up to maximum)

3. Understanding Tax Components

Federal Tax: Applies to all Canadians, with rates from 15% to 33% depending on income level.

Provincial Tax: Each province has its own tax rates and brackets, generally ranging from 5% to 15%.

CPP: Mandatory retirement savings program with contributions shared between employees and employers.

EI: Provides temporary income support to unemployed workers who qualify.

4. Using the Calculator

Tips: Enter your gross annual salary in CAD and select your province of residence. The calculator will estimate your total tax burden for 2025.

5. Frequently Asked Questions (FAQ)

Q1: Are these tax rates accurate for 2025?
A: These are projected rates based on current trends. Actual 2025 rates will be confirmed by CRA.

Q2: Why is my provincial tax different from my neighbor's?
A: Provincial tax rates vary significantly across Canada. Alberta has the lowest rates, while Atlantic provinces tend to have higher rates.

Q3: Can I reduce my CPP contributions?
A: No, CPP contributions are mandatory for all employed Canadians between 18-70 years old earning more than $3,500 annually.

Q4: Is EI refundable?
A: EI premiums are not refundable, but you may qualify for benefits if you lose your job through no fault of your own.

Q5: What about tax credits and deductions?
A: This calculator provides an estimate before credits. Actual tax payable may be lower after applying credits like the basic personal amount.