The federal tax bracket and personal tax credit amounts increased by an index factor of 1,024 for 2022 (an increase of 2.4%). The federal indexing factors, tax bands, and tax rates have been confirmed by the Canada Revenue Agency (CRA). Tax rates apply cumulatively.A brief comparison of 2021 and 2022 is as follows:
|Taxable Income - 2021 Brackets||Tax Rate|
|$0 to $42,184||5.06%|
|$0 to $42,184||5.06%|
|$42,184.01 to $84,369||7.70%|
|$84,369.01 to $96,866||10.50%||$96,866.01 to $117,623||12.29%|
|$117,623.01 to $159,483||14.70%||$159,483.01 to $222,420||16.80%||Over $222,420||20.5%|
If your taxable income is greater than $42,184, the first $42,184 of taxable income is taxed at 5.06%, another $ 42,185 of taxable income is taxed at 7.70%, and another $12,497 of taxable income is taxed at 10.5%, another taxable income of $20,757 is taxed at 12.29%, another taxable income of $41,860 is 14.70%, another $62,937 is taxed at 16.80%, and any income above $222,420 is taxed at 20.5%.
|2022 Taxable Income||Tax Rates|
|over $46,226 up to $92,454||9.15%|
|over $92,454 up to $150,000||11.16%|
|over $150,000 up to $220,000||12.16%||over $220,000||13.16%|
Canada already has an "alternative minimum tax regime for individuals, which may limit the benefits of certain so-called tax benefits (e.g., tax havens, dividend tax relief, capital gains exemptions, etc.) by adjusting the calculation of the taxable income for these items and then applying a federal tax rate of 15%. This new minimum tax seems to take a different approach since it limits the benefits of all tax breaks (which currently apply to tax rebates based on taxable income) so that federal tax is at least 15% of taxable income.
Under the Canadian marginal tax rate for 2021, an individual with a taxable income of $216,511 would pay a total federal tax, prior to credit, at an effective federal rate of approximately 23.16% (the income would increase for higher taxable income as the higher marginal 33% rate would apply to other income). The maximum amount of most federal credits is relatively small, with the exception of medical expenses, charitable donations, and taxable dividends, which depend solely on the amount of those expenses or income (although the requirements for annual donations are limited to 75% of net income). As a result, it would appear that this proposed minimum tax would most likely strike taxpayers with a combination of large donations, medical bills, or dividend income in proportion to their taxable income for the year. This is strange because the Liberal Platform says that the goal of this proposed change is to stop people from "artificially paying no tax by using deductions or credits too much."
Under current Canadian tax law, profits from a "quick release" of residential property may already be subject to full taxation as current income if the purchase was motivated by the prospect of resale at a profit. Consequently, the "anti-rollover" tax proposal appears to apply only if the homeowner seeks to exploit a "random" resale opportunity that is not triggered by a change in circumstances and is therefore expected to have a rather limited impact. However, when combined with the additional reporting requirements previously introduced for the primary residence exemption, the clear line test is likely to strengthen the Revenue Agency's (CRA) enforcement efforts.
|2022 Personal Amount (1)||2022 Tax Rate||2021 Personal Amount (1)||2021 Tax Rate|
Liberals promised to create a federal minimum tax that would require people with taxable income above the highest income tax threshold ($ 216,511 in 2021; $ 222,661 in 2022 according to official parliamentary budget estimates) to pay at least 15 % of federal income tax. . The minimum tax would replace the net federal tax if it is less than the minimum tax. Any foreign income taxes paid would reduce the minimum tax payable based on the ratio of foreign income to net income.Note:
All tax figures are annexed from platforms supported by CRA.