If tax brackets didn’t change to account for this, then people would be paying a disproportionately high tax rate based on their income.įor example, imagine a scenario where tax brackets aren’t indexed to inflation for 50 years. Indexing tax brackets to inflation is a good thing, as it reduces the amount of taxes you pay. Since inflation increased dramatically in 2022, the tax brackets saw considerable changes and were increased by 6.3% for 2023.Īs inflation rises, the cost of consumer goods typically increases along with wages. These tax rates, along with other benefits, tax credits, and payments, are indexed to the inflation rate. Why are Canada’s tax brackets changing?Įvery year, Canada incrementally changes the federal income tax brackets to account for inflation. Here are the tax brackets for 2023, as outlined by the CRA:Īny Canadians earning less than $53,359 in taxable income per year (but above the basic personal amount of $15,000) will be subject to the base 15% tax rate. In 2023, Canada’s federal tax brackets increased by 6.3% to account for inflation. The new federal tax brackets for Canadians in 2023 These changes could impact how you’re taxed when you file your 2023 income tax returns next year.īelow, I’ll outline the new tax brackets for this year and discuss some other notable changes that could affect your personal finances. This means that there are going to be some changes as we move into 2023. ![]() Canada’s tax brackets are indexed and adjusted to account for inflation. In 2022, Canadians experienced high inflation levels as shifts in the global economy began to settle.
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