What Are Tax Brackets?
The Canada Revenue Agency collects federal income taxes using a marginal tax rate system. A different tax rate is applicable to each level of income, and these levels are called tax brackets.
Tax brackets are structured so that low-income Canadians pay a lower percentage in taxes than high-income Canadians. Changes are made annually to the income levels for the different tax brackets and periodically for the various tax rates for each bracket.
Why Do Tax Brackets Change?
Tax brackets are updated based on inflation rates using the Consumer Price Index. This means that tax bracket thresholds increase in relation to the increase of the costs of goods and services.
2026 Annual Inflation Adjustment
Several updates are being made for the 2026 tax year, including:
- Federal tax brackets will increase by 2% based on inflation
- The basic personal amount of tax-free annual income has increased from $16,129 to $16,452
- The Canadian Pension Plan contribution rate will remain at 5.95% for employees, and the maximum pensionable earnings have increased to $74,600 from $71,300
- The Canada Child Benefit has increased from $7,997 to $8,157 per child under the age of 6, and from $6,748 to $$6,883 per child between the ages of six and 17, effective July 2025 to June 2026
Combined Federal and Provincial 2026 Tax Brackets for Alberta
Considering both Canadian and Alberta tax brackets and rates, salary and other income will be taxed according to these parameters for Albertans:
- 22% on the first $58,523, plus
- 28.5% on income over $58,523 up to $61,200, plus
- 30.5% on income over $61,200 up to $117,045, plus
- 36% on income over $117,045 up to $154,259, plus
- 38% on income over $154,259 up to $181,440, plus
- 41.29% on income over $181,440 up to $185,111, plus
- 42.29% on income over $185,111 up to $246,813, plus
- 43.29% on income over $246,813 up to $258,482, plus
- 47% on income over $258,482 up to $370,220
- 48% on income over $370,220
Capital gains income is included in taxable income at 50% of the actual gain.
Canadian Tax Brackets in 2026
Federal tax brackets and rates have been updated as follows for 2026:
- for income under $58,523, the tax rate is 14%
- for income from $58,523 to $117,045, the tax rate is 20.5%
- for income from $117,045 to $181,440, the tax rate is 26%
- for income from $181,440 to $258,482, the tax rate is 29%
- for income of $258,482 and over, the tax rate is 33%.
Provincial Tax Brackets in 2026 for Alberta
Changes to Alberta’s tax brackets have been made for 2026. They are:
- 8% applicable to the first $61,200
- 10% applicable to taxable income from over $61,200 up to $154,259
- 12% applicable to taxable income from over $154,259 up to $185,111
- 13% applicable to taxable income from over $185,111 up to $246,813
- 14% applicable to taxable income from over $246,813 up to $370,220
- 15% applicable to taxable income over $370,220
What Do Tax Rate Changes Mean for You?
Though these annual changes may seem minor, they can have a big impact on your financial situation year over year. It’s important to understand how new tax rates and brackets will affect you and your family. Working with an accounting firm to prepare and implement tax planning strategies to help you save money and ensure optimal results will provide you with clarity and control over the impact that changing tax rates can have on you.
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