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 the rate of tax increases as the amount of income increases. There are different levels or federal and provincial tax brackets have different rates of tax.
Residents of Canada pay both federal and provincial taxes, which are both based on the progressive system, with different rates of tax applied 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 Alberta part of the year, and then moved to British Columbia (BC) in October, if you were living in BC on December 31 you will be subject to BC income tax and BC tax credits in addition to the federal taxes everyone in Canada pays.Easy, fast, and even fun. Wealthsimple Tax is CRA-certified tax software that you’ll actually want to use. And you only pay what you want, no catch — get started.
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, and it oversees 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.
British Columbia tax brackets
Income tax in Canada is based on your taxable income. Your taxable income is your total gross income from all sources less eligible deductions and credits. Because Canada uses 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
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%|
British Columbia 2021 tax rates
The tax brackets for British Columbia for 2021 are:
|2021 British Columbia income tax brackets||2021 British Columbia income tax rate|
|On the first $42,184||5.06%|
|$42,184 to $84,369||7.7%|
|$84,369 to $96,866||10.5%|
|$96,866 to $117,623||12.29%|
|$117-623 to $159,483||14.7%|
|$159,483 to 222,420||16.8%|
|More than $222,420||20.5%|
How to calculate income tax in British Columbia
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 BC provincial amount owing is 5.06%, your marginal tax rate (15% + 5.06%) is 20.06%.
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% = $6,300 (federal)
$42,000 x 5.06% = $2,125.20 (BC)
Total federal and provincial income tax on taxable income: $6,300 + $2125.20 = $8,425.20
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 $49,000. You will still pay the same federal tax of 15%, since you are in the first tax bracket. That works out to $7,350.
For the BC portion, you will pay 5.06% on the first $42,184, which equals $2,134.51
The remaining $6,816 ($49,000 - $42,184) will be taxed at 7.7% = $524.83
Total BC tax owing: $2,134.51 + $524.83 = $2,659.34
Total taxes owing (federal + BC) = $10,009.34
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 personal amount of $13,808, which reduces your taxable income.
If your income is over $216,511, that personal amount 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 of 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 BC, you are also eligible to claim a credit of $11,070. 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 based 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 800-959-8281.
Non-refundable tax credits reduce the amount of tax you have to pay, but you are only eligible to claim them if you owe taxes. In other words, you need to have earned some kind of income. For non-refundable tax credits, you can only claim enough to reduce your taxes to zero, but you don’t get the excess as a refund. So if you owe $4,000 in taxes, and you have $4,500 in non-refundable tax credits, you can claim $4,000, but you don’t get $500 as a refund. 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 basic personal amount, medical expenses, and charitable or political donations.
British Columbia has a number of tax credits for its residents in addition to the basic exemption. For example, if you are a volunteer firefighter or search and rescue volunteer, you may be eligible to claim an exemption. You may be eligible to claim a BC logging or mining credit, BC Child Opportunity Credit, BC Climate Action Credit, Farmers’ Food Donation Tax Credit, British Columbia Home Renovation Tax Credit for Seniors and Persons with Disabilities, and other credits for tuition, medical expenses or political donations.
This isn’t a comprehensive list and 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.
Frequently asked questions
BC tax brackets are added to federal tax brackets to determine the total amount of income tax you pay. You pay the higher tax rate on each additional dollar of income. The highest combined BC tax bracket is 53.50% on every dollar you make over $222,420. The lowest tax bracket is 20.06% on the first $42,184 you make.
Yes BC tax brackets are incremental. The more you earn, the more tax you pay on that additional income. Incremental tax brackets mean that those who earn more pay a higher percentage of their income to the CRA. A uniform tax rate would mean that everyone, no matter their income, pay the same percentage. That leads to high income earners paying a relatively small amount. There are pros and cons to both systems…
To know what tax bracket you’re in check out the chart above or look on the CRA website.
BC tax brackets may change annually.
BC tax is paid along with your federal tax by April 30 if you are employed.
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