Lesson 2: Personal Taxes - Income Tax

   Constructing Knowledge

The Canada Revenue Agency (CRA) is responsible for collecting both the Federal and Provincial Income taxes. Income tax is paid by every person who is working. Employers will deduct income tax directly from gross pay and send the collected tax directly to the CRA.

Income Tax is the main revenue that governments (both Federal and Provincial) use to pay for its programs. Some examples of programs are health care, building roads, the RCMP, and federal regulating agencies like the Canadian Environmental Assessment Agency.

The Federal income tax rate changes depending upon income level. The graduated system of tax rates is known as "tax brackets". Income tax is calculated much like graduated piecework. The rates for Federal Income tax are:

  • 15% of the first $43 561 of income
  • 22% on the next $43 562 of income (income over $43 561, but under $87 123)
  • 26% on the next $47 931 of income (income over $87 123, but under $135 054)
  • 29% on income over $135 054

In Alberta, all Provincial Income tax is paid at a flat rate of 10%. No matter how much money you earn, you are taxed at a rate of 10% which goes to the Provincial Government. Alberta is the only province that uses a flat income tax rate. You may research other provincial income tax rates by searching the Canada Revenue Agency website for provincial income tax rates.

On a typical pay stub, both the federal and provincial tax amounts are listed as one deduction only.


2014 © Alberta Distance Learning Centre