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The tax brackets do not seem to include a 0% tax rate up to the basic personal amount (BPA), so how does this work with income taxes?

E.g. BPA is 15k, federal tax bracket is 15% for 50 197$ or less. If I make 15 100$, is my tax 100$ or only 15$? Also I tried the tax estimator on turbotax and it says the tax is 0?

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The tax brackets are for amounts of taxable income. The personal allowances specify the amount of income that is not considered taxable.

If you earn $15,100 then your first $15,000 is not taxable. You have a taxable income of $100, and you pay 15% ($15) in tax on it, since it all falls in the first bracket.

If you earned $65,000 you would have a taxable income of $50,000 and pay $7,500.

What may be throwing you off is that some tax calculators include EI and CPP contributions as taxes. Those contributions don't follow the brackets, so you can be below the lowest tax bracket threshold and still be charged "tax" (which is really EI and CPP).

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  • Hey, thanks for the reply. that makes sense, but why do tax estimators calculate a federal tax of 0 for 15100$ income?
    – qwerty_99
    Commented Nov 21, 2023 at 18:41
  • Hard to tell without all the details.
    – DJClayworth
    Commented Nov 21, 2023 at 18:51
  • This answer seems wrong. Can you link to something that shows this is correct? Using the tax calculator in brian's answer, you can see that the tax is computed on the full income, then there is a tax credit applied computed as 15% times the BPA. The answer from @qwerty_99 seems to be correct.
    – tsmigiel
    Commented Dec 12 at 6:38
  • It is correct. Brian's tax calculator is including EI as a "tax", which is payable on all income. If you go to this calculator which is better and more detailed you will see that on $10,000 there is no federal tax payable, but there is EI and CPP. Since EI and CPP don't use the brackets they will throw the calculation off.
    – DJClayworth
    Commented Dec 12 at 15:12
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Your tax is $15. I don't know what tax calculator you used but complicated ones will have employment income and a bunch of other types of income. You want to use other income or interest income as they don't have side effects. Employment income, for example, will have you contribute to CPP, EI and receive a working tax credit.

Go to https://www.taxtips.ca/calculators/canadian-tax/canadian-tax-calculator.htm and look line by line what happens.

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I found this post here https://www.fidelity.ca/en/insights/articles/personal-amount-tax-credit-guide/

Basically seems that the personal basic amount is like a tax credit, calculated by BPA * lowest tax bracket, and it goes down after a certain income

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  • It's more of an "income credit". Your income is reduced by the amount of the BPA for tax purposes, rather than a reduction of the tax paid. For example you start to pay higher rates only when your taxable income (after removing the BPA) exceeds each bracket.
    – DJClayworth
    Commented Nov 21, 2023 at 17:41

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