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Canada Income Tax in 2026: Federal Brackets, the Basic Personal Amount, CPP and EI Explained

Last reviewed October 8, 2026. Figures come from the Canada Revenue Agency's 2026 payroll deduction tables. The example is our own calculation and covers federal tax only. Sources are at the end.

Canadians pay income tax to two governments: the federal government and their province or territory. Most explanations mix the two, which makes the numbers hard to follow. This guide explains the federal side for 2026, adds the payroll premiums for the Canada Pension Plan (CPP) and Employment Insurance (EI), and walks through a worked example. Provincial tax is on top of this and varies by province.

The 2026 federal brackets

Canada uses a progressive system. Each rate applies only to the slice of taxable income inside its bracket, as in the US. For 2026, the federal rates and thresholds are:

Taxable income Federal rate
Up to $58,523 14%
$58,523 to $117,045 20.5%
$117,045 to $181,440 26%
$181,440 to $258,482 29%
Over $258,482 33%

The lowest rate is 14% for 2026, and the thresholds were indexed by 2% for inflation.

The basic personal amount

Every taxpayer gets a non-refundable tax credit on a basic personal amount. For 2026, the federal maximum is $16,452, and it is reduced for very high incomes, down to a minimum of $14,829.

The credit is worked out at the lowest rate. So the basic personal amount saves most people 16,452 × 14% = $2,303.28 of federal tax. It acts as a tax-free threshold in practice, although it is technically a credit, not a deduction.

A worked example: $80,000 of taxable income

Assume taxable income of $80,000, no other credits, and look at the federal tax only.

Step 1: tax by bracket.

  • First $58,523 at 14% = $8,193.22
  • Remaining $21,477 (from 58,523 to 80,000) at 20.5% = $4,402.79
  • Total before credits = $12,596.01

(The CRA's payroll formula gives the same answer: 80,000 × 20.5% − $3,804 = $12,596.)

Step 2: subtract the basic personal amount credit. 16,452 × 14% = $2,303.28.

Federal tax after this credit ≈ $12,596.01 − $2,303.28 = $10,292.73.

What the numbers mean.

  • Marginal federal rate: 20.5% (the rate on the last dollars)
  • Average federal rate on the $80,000: 10,292.73 ÷ 80,000 = 12.9%

Real returns include other credits, such as the Canada employment amount and credits for CPP and EI contributions, so the actual figure would be a little lower. Provincial tax would be added.

CPP and EI premiums

Employees also pay payroll premiums. For 2026, the CRA tables list:

Canada Pension Plan (CPP)

  • Base rate: 4.95% on earnings between a $3,500 exemption and the year's maximum pensionable earnings of $74,600, to a maximum of $3,519.45
  • First additional contribution: 1%, to a maximum of $711.00
  • Second additional contribution (CPP2): 4% on earnings between $74,600 and $85,000, to a maximum of $416.00

Employment Insurance (EI) (outside Quebec)

  • Rate: 1.63% on insurable earnings up to $68,900, to a maximum employee premium of $1,123.07

For an employee earning $80,000:

  • CPP: 3,519.45 + 711.00 + (80,000 − 74,600) × 4% = $4,446.45
  • EI: $1,123.07 (at the maximum, since earnings exceed $68,900)

So CPP and EI together take about $5,569.52. The employer pays its own share on top.

Note that CPP and EI premiums are not simply "taxes you lose". CPP builds your retirement pension entitlement, and EI provides income support if you lose your job, though neither works like a savings account.

Putting it together for the $80,000 example

Item Amount
Federal income tax (after basic personal amount) about $10,293
CPP $4,446.45
EI $1,123.07
Total before provincial tax about $15,862

Provincial income tax then reduces your take-home pay further. For provincial brackets and credits, check your province's tax authority or the CRA's information for your province.

Registered accounts that reduce tax

Two accounts are widely used in Canada:

  • RRSP (Registered Retirement Savings Plan): contributions are tax-deductible and growth is tax-deferred, with withdrawals taxed as income. It works like a traditional retirement account.
  • TFSA (Tax-Free Savings Account): contributions are not deductible, but growth and withdrawals are tax-free. It resembles a Roth account.

Contribution limits change yearly. Check your CRA My Account for your personal room. The same marginal-rate logic from our Roth vs traditional guide applies when thinking about RRSP versus TFSA.

Common mistakes

  1. Mixing up federal and provincial tax. The figures here are federal only.
  2. Treating the basic personal amount as a deduction. It is a credit, worked out at the lowest rate.
  3. Forgetting payroll premiums. CPP and EI come out of each paycheck.
  4. Assuming a raise pushes all income into a higher bracket. Only the income above the threshold is taxed at the higher rate.
  5. Using last year's thresholds. They are indexed each year.

How we checked these numbers

We read the 2026 brackets, basic personal amount, CPP and EI figures from the CRA's payroll deduction tables, then calculated the example by hand and with a script. If a figure differs from the CRA, please tell us through the contact page.

This article is general information and an illustration of the arithmetic, not tax advice. Your situation, province and credits will change the result. Consult the CRA or a qualified tax professional.

Sources