Understanding Your Take-Home Pay: A Guide for Canadians

Understanding Canadian Taxes: How Much Do You Really Keep? (With Examples)

When Canadians get a raise or land a new job, the first thought is usually "How much will I actually take home?"
Taxes can feel confusing, but today we’ll break it down with real numbers — and show you some surprising strategies to keep more of your hard-earned money.

How Income Taxes Work in Canada

Canada uses a progressive tax system.
This means the more you earn, the higher the rate on your next dollar earned — but your earlier income is still taxed at lower rates.

Here are the 2025 Federal Tax Brackets:

Income Range Federal Tax

Rate Up to $55,867 15%

$55,868 – $111,733 20.5%

$111,734 – $173,205 26%

$173,206 – $246,752 29%

Over $246,752 33%

(Plus provincial taxes — we'll use Alberta rates later in an example.)

Example: Sarah’s Salary Jump

Sarah works in Calgary.
She earned $60,000 last year and just got a raise to $80,000.

How Her Taxes Look:

At $60,000 At $80,000

Federal tax ~$8,800 ~$13,600

Alberta tax ~$3,000 ~$4,300

Total tax ~$11,800 ~$17,900

Take-home pay ~$48,200 ~$62,100

Key Point:
Although her salary increased by $20,000, her take-home only increased by about $14,000 — because higher income is taxed more.

The Myth of "Losing Money" When You Earn More

Sometimes people worry, "If I make more, I'll lose more to taxes!"
Wrong.
Only the extra dollars are taxed at a higher rate, not your entire income.

Sarah’s first $55,867 is still taxed at only 15% federally — only the extra income ($4,133 at $60k or $24,133 at $80k) moves into the 20.5% bracket.

Bonus Tip: How Sarah Could Pay Less

Sarah could reduce her taxes by:

• RRSP contributions:
  If Sarah contributed $10,000 to her RRSP, she could lower her taxable income from $80,000 to $70,000, saving about $3,000 in taxes!

• Claiming deductions:
  Medical expenses, child care, moving for work, and tuition credits can all cut her tax bill.

Final Thoughts

Taxes are unavoidable — but smart planning can help you keep more of your money.
Understanding how tax brackets work helps you make better decisions about raises, bonuses, investments, and retirement savings.

Next time you hear "you'll lose money if you earn more," you’ll know the truth — and be way ahead of the game.