Canada’s income tax brackets for 2023, plus the maximum tax you’ll pay based on income

Who pays the surtax in canada?

Examining the tax rates in Prince Edward Island and Ontario might suggest lower figures compared to other provinces, but these provinces impose a surtax on personal income, which is essentially like charging a tax on a tax.

Prince Edward Island surtax

In P.E.I., residents pay a 10% surtax, unless their basic provincial tax payable is $12,500 or less, in which case no surtax is applied. To determine the surtax, multiply your annual income by 0.10.

Ontario surtax

The Ontario surtax is more complex, so the calculation takes a few more steps, as outlined here: 

For 2023, if your base provincial tax is up to $5,315, you won’t pay a surtax. If your base provincial tax is from$5,315 to $6,802, you pay 20% on the portion of provincial tax owed above $5,315. If your provincial tax exceeds $6,802, you will owe 20% on the portion of provincial tax over $5,315, plus 36% on the portion over $6,802. 

How to lower your income tax

Understanding tax brackets makes it easier to figure out how much tax you’ll owe and if you’re in for a refund. That way you can be prepared ahead of the April 30, 2024 tax payment deadline and avoid having to pay interest and penalties on overdue taxes. 

To lower your tax bill, consider a proactive approach, like making monthly contributions to your RRSP—the RRSP contribution deadline this year is February 29, 2024. You can deduct these contributions from your taxable income, potentially reducing your tax bill or increasing your tax refund, while maximizing RRSP benefits and investment growth. (Find out how much you should have in your RRSP, whether an RRSP or TFSA makes more sense for you, and what investments to consider.)

To estimate tax savings from RRSP contributions, determine the tax rate as explained above, then multiply your total contribution by that rate for the approximate tax reduction or potential refund.