Let’s talk about the salary scheme and tax brackets that you earn in Canada and what comes into your pockets after all the deductions, it’s basically the expectations vs. reality of what the earning looks like and I’ll be using a particular amount so that it’s relatable to know the breakdown of how the deductions are and what to expect as the net income which is what goes into your pocket after all the deductions have been made. This is something everyone should be aware of and if you’re going to immigrate to Canada, this should not catch you by surprise when you start working.
So I’ll be using the benchmark of $20 per hour. Also, there’s something called tax brackets. This is different with different provinces, which means that the tax bracket for Manitoba is different from that of Ontario. What this means is that if one is living in Manitoba and the person is earning $36,000 per annum there is a percentage that is deducted from the individual’s salary (which is the tax bracket). If the person moves to Ontario and still earns the same amount, the tax bracket of Ontario will be used
I’ll be using Manitoba’s salary and tax bracket as illustration in this article. Manitoba has three tax brackets combined with the federal; the first tax bracket is 10.8%. This implies that if you are earning from $0 – $32,670 per annum, 10.8% will be deducted and if your gained an increase in salary and you earn $70,000, automatically your tax bracket will be increased to 12.75% and a further increase of salary about $70k, attracts a tax bracket of 17.4%. This is the provincial tax bracket scheme.
The Federal Tax Bracket
For the federal tax bracket,
- 15% for the first $46,000,
- 20.5% for those who earn $60k – $93k per annum
- 26% is deducted from those who earn between $93k – $144k
- 29% is deducted from those who earn between $144k – $205k
- 33% is deducted from those who earn about $205k
but I don’t want to dwell on the tax bracket so much although it has an effect on how much will be deducted from the salary, but I’ll be dwelling so much on the main salary so that you can understand what to expect at the end of the month.
Using a base amount which is $20 per hour, it’s very rare for a new immigrants to get a salary or to get a job that pays about $20.00 per hour but it’s not impossible. There are a group of people who earn as much as that and more but most immigrants won’t because of their backgrounds so you have to start from the bottom and walk your way up.
Therefore most immigrants start with a minimum wage, some start with $15 per hour while others start with 17, 18 or 19 and it increases as you progress. If you are lucky to earn $20 per hour, your tax bracket is 32.8%. This gives you $3,000 per month and $36,000 per annum. So let’s break it down, automatically you’re earning $150 per day and in Canada, the way people get their salaries is different. Some companies pay weekly, some pay bi-weekly, others pay monthly but the majority of companies paid bi-weekly. So if you are paid bi-weekly, you’ll be getting $1500 for $20/hour.
Now for $1500 bi-weekly, if your company has a union, you’ll be required to pay union dues $20 and this is deducted from your salary, now that’s $1480, this amount is the taxable income. The federal tax will be $131.83, and the provincial tax will be $114.07 so automatically $245.30 will be taken out from the balance $1480 and what you get is $1,235.
More deductions are still made, another deduction is called CPP (Canada Pension Plan). Everybody has to contribute to Canada Pension Plan because it is a compulsory deduction.
This will take $69.63, another deduction called EI will take $24. At the end of the day, from $1500, after $359.23 has been deducted all together, you’ll then get $1140.77, so the real monthly pay is $2281.54
This amount is what is used to pay for bills like rent, phone bills, insurance, day care, cars bills and the higher you earn, the higher the tax, so it eventually looks like you’re working hard and not much is coming in. What are your thoughts about the salary and the tax brackets in Canada