DOSSIER A / RATES AND BRACKETS
5 FILES
Income tax
Federal rates and brackets, the basic personal amount, the tax taken off each paycheque and what a refund really measures.
This federal tax cut affects millions of Canadians: what the new rate means
For 2026, the first federal tax bracket is taxed at 14%, down from the 15% rate that applied before the reduction began in 2025. Nearly 22 million Canadians are expected to benefit, but the size of the saving depends on income and credits.
Why a bigger refund is not the same as paying less tax
A refund only measures how much more you paid during the year than you owed at the end of it. Two people with exactly the same tax bill can get very different refunds, and a smaller refund can sit beside a lower tax bill.
Why the tax on your paycheque changed in January
Every January, employers switch to new payroll formulas. For 2026 the federal rate itself barely moved on the pay stub, because payroll had already used 14% since July 2025. Indexation, a reset of yearly maximums and an old TD1 did the rest.
What the basic personal amount does, and why it is smaller for high earners
Almost everyone who files a return claims it, and it is worth $16,452 for 2026. Above a net income of $181,440 it starts to shrink, and the way it shrinks quietly adds a fraction of a percent to the tax rate on those dollars.
How Canada’s federal tax brackets actually work in 2026
Moving into a higher bracket never makes your whole income more expensive. Only the dollars above each threshold are taxed at the higher rate, which is why your average rate is always lower than your top one.
THE FRIDAY FILE / WEEKLY / FREEThe Friday File. One tax rule or household number, explained on a single page.
Every Friday: one rate, one credit, one date or one limit worth checking, from income tax and the return to savings accounts and federal benefits. Free, and you can unsubscribe from any issue.