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Income Tax Brackets

Exploring Beyond Salary to Determine Your Tax Bracket

Let’s delve into the concept of income tax brackets, the progressive system utilized in Canada to ensure fair taxation based on different income levels. You may already be familiar with the fundamentals of these brackets, but did you know that factors beyond just your salary can influence the specific tax bracket you fall into? In this comprehensive guide, we’ll explore the nuances and considerations involved in determining your tax bracket.

Income Tax Brackets

Understanding the Basics of Tax Brackets: Navigating Income Tax Rates

Let’s dive into the fundamental concepts of tax brackets. Each year, our income is subject to taxation, but the tax rates vary based on the amount earned. Federally, individuals earning less than $46,605 are taxed at the lowest rate of 15%. However, it becomes more intricate from here. Those in the second tax bracket, earning between $46,605 and $93,208, are taxed at 15% for the first $46,605 and 20.5% for the remaining amount up to $93,208. Subsequently, the tax rate increases to 26% for income between $93,208 and $144,489, 29% for income between $144,489 and $205,842, and reaches the highest rate of 33% for income exceeding $205,842.

Now that you have an understanding of your tax bracket, let’s explore some key factors that can impact it.

Changes in Salary A significant change to your income, such as a raise, has the potential to push you into a new income tax bracket. If, for example, your salary increases from $45,000 to $50,000, any income earned over $45,916 will now be taxed at a rate of 20.5%. It’s important to consider how salary adjustments may affect your tax obligations.


Taxable Employee Benefits It’s not just your salary that affects your tax bracket.

Certain employee benefits are considered taxable and contribute to your overall income. Benefits such as prizes, awards, holiday trips, bonuses, and personal use of an employer’s automobile are typically taxable. While these benefits may not often be significant enough to move you into a new bracket, it’s crucial to be aware of their impact.

Income Tax Brackets

An employee stock option, however, can have a more substantial effect.

If you purchased company shares at a lower price than their fair market value, the difference is included in your taxable income. Depending on the extent of your stock purchase, this can significantly influence your tax bracket.


Understanding the components that contribute to your income and tax bracket is essential for avoiding surprises when you receive your T4 statement. If you’re uncertain about any specific details, don’t hesitate to seek clarification from your employer.