Provinces With the Lowest and Highest Income Taxes
Income tax differences across Canadian provinces meaningfully affect how much income households keep after deductions. While federal tax brackets apply uniformly nationwide, provincial and territorial tax systems introduce wide variations in total tax burden. These differences influence disposable income, savings capacity, and long-term financial planning decisions.
Taxes also affect housing affordability. Even when gross income is identical, after-tax income can vary significantly by province, shaping how comfortably mortgage payments and housing costs fit into a household budget.
Key Takeaways
- Federal tax rates are identical nationwide, and provincial rates drive most differences.
- Lower taxes improve net income, but do not guarantee lower living costs.
- Mortgage qualification uses gross income; after-tax net income affects affordability and cash flow.
How Income Taxes Work in Canada
Canada applies a progressive income tax system at both the federal and provincial levels. The federal government sets national tax brackets, while provinces and territories apply their own rates to the same taxable income base. Quebec administers and collects its own personal income tax system separately.
Under a progressive system, income is taxed at multiple tax tiers, not at a single flat rate. Each portion of your taxable income is taxed at the rate assigned to that bracket, while lower portions are always taxed at lower rates. Moving into a higher tax bracket does not mean all your income is taxed at that higher rate; only income above the threshold is taxed at that rate. This structure is why marginal tax rates can sound high, even though the average tax rate paid is usually much lower.
2026 Federal Income Tax Brackets (CRA)
The table below reflects CRA-confirmed federal income tax rates for 2026, including full implementation of the legislated reduction to the lowest bracket.
| Tax rate | Taxable income threshold |
|---|---|
| 14% | on the portion of taxable income that is $58,523 or less, plus |
| 20.5% | on the portion of taxable income over $58,523 up to $117,045, plus |
| 26% | on the portion of taxable income over $117,045 up to $181,440, plus |
| 29% | on the portion of taxable income over $181,440 up to $258,482, plus |
| 33% | on the portion of taxable income over $258,482 |
Today’s Best Mortgage Rates as of February 4, 2026
Provinces With the Lowest Income Tax Rates
Some provinces maintain flatter or lower marginal tax structures. Alberta and Saskatchewan are commonly cited examples, particularly for middle-income earners. Lower provincial taxes increase net income and monthly flexibility. Mortgage lenders, however, continue to qualify borrowers using gross income and debt-service ratios, not after-tax income.
Alberta Income Tax Rates for 2026
| Tax rate | Taxable income threshold |
|---|---|
| 8% | on the portion of taxable income that is $61,200 or less, plus |
| 10% | on the portion of taxable income over $61,200 up to $154,259, plus |
| 12% | on the portion of taxable income over $154,259 up to $185,111, plus |
| 13% | on the portion of taxable income over $185,111 up to $246,813, plus |
| 14% | on the portion of taxable income over $246,813 up to $370,220, plus |
| 15% | on the portion of taxable income over $370,220 |
Saskatchewan Income Tax Rates for 2026
| Tax rate | Taxable income threshold |
|---|---|
| 10.5% | on the portion of taxable income that is $54,532 or less, plus |
| 12.5% | on the portion of taxable income over $54,532 up to $155,805, plus |
| 14.5% | on the portion of taxable income over $155,805 |
Provinces With the Highest Income Tax Rates
Other provinces apply steeper progressive taxation, particularly at moderate and higher income levels. Higher marginal rates reduce take-home pay, but affordability depends on a broader mix of housing costs, wages, and public services.
Quebec Income Tax Rates for 2026
| Rate | Taxable income |
|---|---|
| 14% | $54,345 or less |
| 19% | More than $54,345 but not more than $108,680 |
| 24% | More than $108,680 but not more than $132,245 |
| 25.75% | More than $132,245 |
Nova Scotia Income Tax Rates for 2026
| Tax rate | Taxable income threshold |
|---|---|
| 8.79% | on the portion of taxable income that is $30,995 or less, plus |
| 14.95% | on the portion of taxable income over $30,995 up to $61,991, plus |
| 16.67% | on the portion of taxable income over $61,991 up to $97,417, plus |
| 17.5% | on the portion of taxable income over $97,417 up to $157,124, plus |
| 21% | on the portion of taxable income over $157,124 |
Why Quebec Is Different
Quebec operates a standalone personal income tax system administered by Revenu Québec. Residents file a separate provincial return, and the federal tax payable is reduced to reflect Quebec’s independent collection structure.
This system makes direct comparisons between Quebec and other provinces less intuitive and underscores the need to evaluate Quebec tax rates independently.
How Provincial Taxes Affect Mortgage Qualification and Affordability
Mortgage qualification in Canada is based on gross household income. Lenders calculate GDS and TDS ratios using gross income, contract payments, and fixed housing costs. Provincial tax rates do not change how much a borrower qualifies for.
Taxes still matter for affordability. Higher income taxes reduce net income, limiting monthly flexibility and increasing sensitivity to rising housing or non-housing costs over time.
We’re curious…
Are you a first-time buyer?
Frequently Asked Questions (FAQs) on Lowest and Highest Income Taxes in Canada
Which province has the lowest income tax in Canada?
The answer depends on income level, but Alberta often ranks among the lowest due to fewer brackets and lower marginal rates.
Which province has the highest income tax rates?
Quebec and Nova Scotia typically apply the highest marginal income tax rates for middle- and higher-income earners.
Do provincial taxes affect mortgage approval?
Mortgage approval is based on gross income and debt-service ratios. Taxes influence affordability, not qualification amounts.
Are federal income tax rates the same across Canada?
Federal tax rates and brackets are identical nationwide. Differences come from provincial systems.
Is moving to a lower-tax province always cheaper?
Lower taxes alone do not guarantee a lower overall cost of living. Housing prices and wages matter just as much
Final Thoughts
Income tax differences shape net income, savings capacity, and long-term resilience, but strong decisions require looking beyond tax rates alone. Housing costs, income stability, and mortgage structure ultimately matter more than chasing the lowest headline tax rate.
For personalized advice and tailored mortgage solutions that fit your financial goals, contact nesto mortgage experts today. Let us help you make the most of your hard-earned money, starting with the best mortgage rate.
Why Choose nesto
At nesto, our commission-free mortgage experts, certified in multiple provinces, provide exceptional advice and service that exceeds industry standards. Our mortgage experts are salaried employees who provide impartial guidance on mortgage options tailored to your needs and are evaluated based on client satisfaction and the quality of their advice. nesto aims to transform the mortgage industry by providing honest advice and competitive rates through a 100% digital, transparent, and seamless process.
nesto is on a mission to offer a positive, empowering and transparent property financing experience – simplified from start to finish.
Contact our licensed and knowledgeable mortgage experts to find your best mortgage rate in Canada.
Ready to get started?
In just a few clicks, you can see our current rates. Then apply for your mortgage online in minutes!
