Danielle Kubes is a trained journalist and investor who has written about personal finance for the past six years. Her writing has been published in The Globe and Mail, National Post, MoneySense, Vice and RateHub.ca. Danielle writes about investing and personal finance for Wealthsimple. She has a Bachelor of Humanities from Carleton University and a Master of Journalism from Ryerson University.
Canada uses a progressive tax system, which means if you make more money, you are expected to pay more income tax.
As a resident of Canada, you pay both federal and provincial taxes, and they are both based on the progressive system, with different rates of tax at different levels of income.
Provincial taxes are based on your province of residence as of December 31. For example, if you are filing 2021 taxes, and you lived in Nova Scotia part of the year, and then moved to Alberta (AB) in October, if you were living in AB on December 31 you will be subject to AB income tax and AB tax credits in addition to the federal taxes everyone in Canada pays.Wealthsimple Tax is a simple way to file your taxes. File your return with confidence it’s done right, and pay what you want—there’s no catch.
The province of Quebec administers provincial taxes on behalf of Quebec residents. For the rest of Canada, the Canada Revenue Agency (CRA) is the government organization in charge of taxation in Canada, and they take care of both federal and provincial taxes.
Information provided here is for general information only, and is not intended as financial advice. Your personal situation is unique, and you should always consult a professional financial expert.
Alberta Tax Brackets
Income tax in Canada is based on your taxable income, which is your total gross income from all sources less eligible deductions and credits. Both the federal and provincial governments have deductions and credits to reduce the amount of tax you owe. Because we use a progressive tax system, the more money you make, the higher the rate of tax you will pay. That system applies to both federal and provincial taxes.
Federal Tax Bracket Rates for 2021 Tax Year
The following are the federal tax rates for tax year 2021 according to the Canada Revenue Agency (CRA):
|2021 Federal income tax brackets||2021 Federal income tax rates|
|$49,020 or less||15%|
|$49,020 to $98,040||21%|
|$98,040 to $151,978||26%|
|$151,978 to $216,511||29.00%|
|More than $216,511||33%|
Alberta 2021 tax rates
The tax brackets for Alberta for 2021 are:
|2021 Alberta income tax brackets||2021 Alberta income tax rate|
|$131,220 or less||10%|
|$131,220 to $157,464||12%|
|$157,464 to $209,952||13%|
|$209,952 to $314,928||14%|
|More than $314,928||15%|
How to calculate income tax in Alberta
Your marginal tax rate is the total amount of federal and provincial taxes you owe. It’s the combined total amount you will have to pay. For example, if your taxable income after deductions and exemptions was $42,000, your federal tax owing is 15%, and your AB provincial amount owing is10%, your marginal tax rate (15%+10%) is 25%. Please note we are not taking things like credits or deductions into consideration for this example.
If you want to get a rough estimate of how much income tax you owe on your taxable income, first calculate your federal income tax, and then calculate your provincial tax, and add the amounts together.
So if your taxable income was $42,000 and you didn’t have any deductions or credits, your calculation would be:
$42,000 x 15%=$6300 (Federal)
$42,000 x 10%=$4200 (AB)
Total federal and provincial income tax on taxable income: $6300+$4200=$10,500.
NOTE: In a progressive tax system, your income tax payable is cumulative. Depending on what tax bracket your taxable income falls in, you could be paying multiple rates of tax.
Let’s say your income is $75,000. You will pay the federal tax of 15% on the first 49,020. That works out to $7353. The remaining $25,980 will be taxed at 20.5% since it falls in the 2nd tax bracket. $5325.90. So your total federal tax owing is $7353 + $5325.90=$12,678.90
For the AB portion, you will pay 10% on $75,000 since it is still within the first AB tax bracket. Total AB tax owing: $7500.
Total taxes owing (federal + AB)=$12,678.90 +$7500=$20,178.90.
How to reduce your taxes owing
Every taxpayer in Canada is eligible to claim federal deductions, and the provinces have deductions for their residents. Here are some of the common ones, but it’s not a comprehensive list, and you should always check with a financial expert to ensure you are claiming all the credits and deductions you are eligible for.
Every taxpayer in Canada is eligible to claim a basic federal amount of $13,808 which reduces your taxable income.
If your income is over $216,511, that credit is $12,421. There are additional credits for residents who are age 65 or older, who have been classified as disabled, or who are caretakers to a person with a disability.
If your income is less than $13,808, you shouldn’t have to pay any income tax. You should still file your taxes, because all kinds of federal and provincial programs, such as GST/HST are based on your income as reported on your income tax return.
In AB, you are also eligible to claim a credit of $19,369. There are additional amounts for seniors, or if you are disabled or you care for a disabled person.
A deduction reduces your taxable income, lowering the amount that income tax will be calculated on. CRA provides detailed information on both federal and province specific deductions. Here are some of the common deductions. There may be others that you qualify for and you should always speak with a financial tax expert about your specific situation, and you can call CRA at 1-800-959-8281.
Once you earn any kind of income, you become eligible to claim non-refundable tax credits to reduce the amount of tax you have to pay. The downside with non-refundable tax credits is you can only claim enough to reduce your taxes to zero, but. you don’t get the excess as a refund. For example, if you owe $3000 in taxes, and you have $4500 in non-refundable tax credits, you can claim $3000, but you forfeit the remaining $1500. In some circumstances, such as tax credits for tuition, student loan interest and donations can be carried forward for future years.
The most common federal non-refundable tax credits are things like the personal exemption, medical expenses, charitable or political donations.
Alberta has a number of tax credits for its residents in addition to the basic personal amount. For example, you may be eligible to claim tax credits for tuition, medical expenses or political donations.
There may be other tax credits you are eligible for. When in doubt, it’s always a good idea to check with a financial expert.
Alberta tax brackets are combined with federal brackets to determine the total amount of income tax owed to the CRA. You pay the higher tax rate on each additional dollar earned. Since Alberta tax brackets are so broad most Albertans will either pay $0 if they make under $19,369, or 10% if they make more than that until $131,220. The most income tax you’ll pay in Alberta is 15%.
Yes, Alberta tax brackets are incremental, and the more you earn the more you pay. However, you have to make more than $131,220 to pay more than 10%.
Look at the chart above. Far more useful, however, will be determining your average tax rate, which can be calculated by dividing your total tax payable by your gross income.
Alberta tax brackets may change annually.
Alberta tax is paid along with your federal tax by April 30 if you are employed. Because of the Covid-19 pandemic the tax deadline for paying 2019 taxes was extended to September 1, 2020.
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