Canada stacks two progressive income taxes: a federal tax (the same across the country) and a provincial tax that varies by province. Each is calculated on your taxable income using its own brackets, and a Basic Personal Amount makes an initial slice tax-free at each level. Because the system is marginal, only the income within each bracket is taxed at that bracket's rate, so your average rate is well below your top marginal rate.

For 2025 the lowest federal rate is a blended 14.5% (it dropped from 15% to 14% on 1 July 2025; the full 14% applies from 2026). Provinces differ markedly: Alberta has a high basic personal amount and an 8% entry rate, while Ontario applies a surtax on higher provincial tax. Outside Quebec you file a single return that calculates both taxes together.