What is a Tax Bracket?

One of the two most misunderstood concepts in the Canadian tax system is that of “tax brackets”.

I have heard from people over the years that they don’t want to work overtime or get a raise because it will put them in a new tax bracket and “the government will just take it all”. This is just false.

While it is true that higher incomes are taxed at higher rates, our progressive tax system is structured so that everyone pays the same amount on their first $25,000 per year – whether that is all you made or it is what you made in one month.