Canada–Ontario Tax Rates 2026: New Brackets, Credits & Savings Tips

The taxation landscape for residents of Ontario has undergone significant adjustments for the 2026 fiscal year. These changes, primarily driven by annual inflation indexing and the full implementation of federal legislative updates, impact how much income taxpayers retain from their paycheques.

Understanding the latest federal and provincial tax brackets is essential for effective financial planning, especially as new payroll deduction limits and tax credit values come into effect.

Also Read

TFSA Contribution Limit for 2026: New Rules, Maximum Amount & Smart Investing Tips

The 2026 tax year is characterized by a “middle-class tax cut” at the federal level and a 1.9% indexing factor for Ontario’s provincial thresholds.

This guide provides a comprehensive breakdown of the updated tax rates, essential credits, and strategic savings tips for Ontario residents based on official data from the Canada Revenue Agency (CRA) and the Ontario Ministry of Finance.

Federal Income Tax Brackets for 2026

For the 2026 tax year, the federal government has fully implemented a reduction in the lowest tax rate. While the rate was 15% in previous years and shifted to an effective rate of 14.5% in 2025 due to a mid-year adjustment, the full-year rate for the first bracket in 2026 is now 14%.

Federal tax brackets are indexed to inflation at a rate of 2.0% for 2026. This means the income thresholds for each bracket have increased, allowing taxpayers to earn more before moving into a higher tax tier. This adjustment helps prevent “bracket creep,” where inflation-driven salary increases push individuals into higher tax brackets without a corresponding increase in real purchasing power.

2026 Federal Tax Rates and Thresholds

Taxable Income Range	Federal Tax Rate
First $58,523	14%
Over $58,523 up to $117,045	20.5%
Over $117,045 up to $181,440	26%
Over $181,440 up to $258,482	29%
Any income exceeding $258,482	33%

This 14% rate applies to the first $58,523 of taxable income. For a typical taxpayer, this federal cut is estimated to provide modest annual savings, helping to offset the rising costs of essential goods and services.

Ontario Provincial Tax Brackets for 2026

Ontario calculates its provincial income tax separately from the federal portion. For 2026, the Ontario provincial indexing factor is set at 1.9%. Similar to the federal system, these adjustments ensure that the Personal income tax rates and credits remain aligned with the Consumer Price Index (CPI).

Ontario utilizes a five-bracket system. It is important to note that Ontario also applies a “surtax” on higher earners, which can significantly increase the effective marginal tax rate for those in the upper brackets.

2026 Ontario Tax Rates and Thresholds

Taxable Income Range	Ontario Tax Rate
First $53,891	5.05%
Over $53,891 up to $107,785	9.15%
Over $107,785 up to $150,000	11.16%
Over $150,000 up to $220,000	12.16%
Any income exceeding $220,000	13.16%

Residents should remember that their total tax bill is the sum of federal and provincial taxes, minus any applicable non-refundable tax credits.

Basic Personal Amount (BPA) Updates

The Basic Personal Amount is a non-refundable tax credit that allows every Canadian to earn a certain amount of income before they begin paying federal income tax. For 2026, the maximum federal BPA has been increased to $16,452.

However, the federal BPA is subject to a “clawback” for high-income earners. Individuals with a net income of $181,440 or less are eligible for the full $16,452 amount. For those earning more than $181,440, the BPA gradually decreases until it reaches a base amount of $14,829 for those earning above $258,482.

At the provincial level, Ontario’s basic personal amount has also been indexed. For 2026, the Ontario BPA is approximately $12,989. These amounts are crucial because they define the “tax-free” portion of your annual earnings.

Changes to Payroll Taxes: CPP and EI in 2026

While income tax rates for lower earners have decreased, payroll taxes—which fund the Canada Pension Plan (CPP) and Employment Insurance (EI)—are seeing increases in 2026. These deductions are mandatory for most employees and employers in Ontario.

Canada Pension Plan (CPP) Contributions

The CPP contribution rate for employees and employers remains steady at 5.95%. However, the Year’s Maximum Pensionable Earnings (YMPE) has increased to $74,600. This means the maximum annual contribution for a worker has risen to $4,230.45.

Furthermore, the “second additional CPP contribution” (CPP2) continues to affect middle and high-income earners. For income earned between $74,600 and the Year’s Additional Maximum Pensionable Earnings (YAMPE) of $85,000, a 4% contribution rate applies. The maximum contribution for this second tier is $416 for the 2026 tax year.

Employment Insurance (EI) Premiums

The EI premium rate for 2026 is set at 1.63% for employees. The maximum annual insurable earnings have increased to $68,900. Consequently, the maximum annual employee premium for 2026 is $1,123.07. Employers continue to pay 1.4 times the employee rate, resulting in a maximum employer premium of $1,572.30 per employee.

Registered Savings Plans: TFSA and RRSP Limits

Leveraging registered savings accounts remains one of the most effective ways for Ontario residents to minimize their tax burden. The limits for these accounts are updated annually or remain steady based on specific legislative formulas.

Tax-Free Savings Account (TFSA)

The annual TFSA contribution limit for 2026 remains at $7,000. This matches the limit from 2024 and 2025. Because the TFSA limit is indexed to inflation and rounded to the nearest $500, the 2.0% inflation rate was not sufficient to trigger a jump to $7,500 this year. Any unused contribution room from previous years carries forward indefinitely, allowing for significant tax-sheltered growth.

Registered Retirement Savings Plan (RRSP)

The RRSP contribution limit for the 2026 tax year has increased to $33,810. This is the maximum amount an individual can contribute, provided they have sufficient earned income from the previous year.

Generally, your RRSP contribution room is 18% of your earned income from the prior year, up to the annual maximum.

Contributions to an RRSP are tax-deductible, which can effectively lower your taxable income and potentially move you into a lower tax bracket.

Key Ontario Credits and Benefits for Residents

Beyond income tax brackets, various credits are available to help manage the cost of living in Ontario. Many of these are delivered through the Ontario Trillium Benefit, which combines three different credits into one monthly or annual payment.

1. Ontario Sales Tax Credit (OSTC): This provides relief for the sales tax paid by low-to-moderate-income residents. For the 2025-2026 benefit year, the maximum annual credit is $371 for each adult and child in a family.
2. Ontario Energy and Property Tax Credit (OEPTC): Designed to assist with property taxes and the sales tax on energy costs. For 2026, non-seniors can receive up to $1,283, while seniors (aged 65+) may be eligible for up to $1,461.
3. Northern Ontario Energy Credit (NOEC): Residents of Northern Ontario may qualify for an additional credit (up to $185 for singles or $285 for families) to offset higher home heating costs in the north.

Additionally, families across the province benefit from the Canada Child Benefit (CCB). For the period starting July 2026, the maximum CCB payment for a child under age six will increase to $8,157 annually, while children aged six to 17 can receive up to $6,883.

Savings Tips for the 2026 Tax Year

With the updated Income tax rates and income thresholds in mind, taxpayers can use several strategies to optimize their finances:

• Maximize RRSP Contributions: If you find yourself at the bottom of a higher tax bracket (e.g., earning just over $117,045), a strategic RRSP contribution could lower your taxable income back into the 20.5% federal bracket, saving you significant tax dollars.
• Utilize the TFSA for Short-Term Goals: Since withdrawals from a TFSA are not considered taxable income, this is an ideal vehicle for emergency funds or large purchases, ensuring your “taxable income” stays low.
• Review Your TD1 Forms: If you have experienced a change in your personal situation (such as a new dependent or a disability), ensure you update your federal and Ontario TD1 forms with your employer. This ensures the correct amount of tax is deducted at the source.
• Track Medical and Tuition Expenses: These non-refundable credits are applied at the lowest tax rate (14% federally in 2026). While the rate has dropped, these credits still provide essential reductions in the total tax owed.

Conclusion

The 2026 tax year brings a mix of relief and new responsibilities for Ontario taxpayers. While the federal “middle-class tax cut” to 14% and the indexing of brackets provide some breathing room against inflation, increased CPP and EI contributions will result in higher payroll deductions for many workers.

By staying informed about the latest thresholds and maximizing available credits like the Ontario Trillium Benefit, residents can better navigate the complexities of the Canadian tax system and keep more of their hard-earned money.

Frequently Asked Questions