Everything you need to know about income tax brackets
Taxpayers are assigned brackets for taxation purposes, which depends almost solely on income. Those in the lowest bracket will pay 15% but those in higher brackets actually pay based on tiers. The portion of their income that is in the lower bracket gets taxed at that lower rate of 15%. The balance of the yearly income is taxed at a higher rate of 20.5% if total income falls within the second bracket. If income is higher than that, an additional tax is assessed for the balance that falls within a third bracket, and so on.
- Changes to your salary, such as a raise or termination pay, will add to your income and may potentially move you into a higher tax bracket.
- Taxable employee benefits can also affect your income. In general, taxable benefits like trips, bonuses and personal use of an employer’s automobile, won’t be substantial enough to move you into a new bracket. But, one that might is an employee stock option.
- Most taxable benefits will be included in your statement of employment.
“Knowing what contributes to your income and your income tax bracket is important, so there are no surprises when your T4 arrives in the mail.”