Albertans pay one of the lowest income tax rates in Canada.
Even with the pause in the indexation of tax brackets in 2020, the “Alberta Tax Advantage” still means that residents of the province pay the lowest federal and provincial marginal tax rates in the country.
Similar to other provinces, Alberta has a progressive tax system and you pay more taxes as your income increases.
Alberta’s tax rate for personal income ranges from 10% to 15% and the combined federal and provincial tax rate for is between 25% and 48%.
Related: Ontario Tax Brackets and Rates
Alberta Tax Brackets 2020
The income tax brackets and rates that apply to taxable income in Alberta for the 2020 tax year are:
Up to $131,220
$131,220.01 to $157,464
$157,464.01 to $209,952
$209,952.01 to $314,928
$314,928.01 and over
To break down the numbers, you pay:
- 10% on the first $131,220 of taxable income, plus
- 12% on the next $26,244 (i.e. on the portion of taxable income over $131,220 up to $157,464), plus
- 13% on the next $52,488 (i.e. on the portion of taxable income over $157,464 up to $209,952), plus
- 14% on the next $104,976 (i.e. on the portion of taxable income over $209,952 up to $314,928), plus
- 15% on amounts exceeding $314,928
Along with provincial taxes, you are also required to pay federal taxes on your income. For 2020, the applicable federal tax brackets and rates are:
Up to $48,535
Over $48,535 and up to $97,069
Over $97,069 and up to $150,473
Over $150,473 and up to $214,368
Alberta Marginal Tax Rates (Federal and Provincial)
Marginal tax rates reflect how much you pay in taxes on an additional dollar of income.
Using the tool here, the combined federal and provincial marginal tax rates for Alberta residents in 2020 are as follows:
The numbers above take into consideration Alberta’s basic personal amount which is $19,369 for this year. It also includes the federal basic personal amount that is up to a maximum of $13,229.
You can use your marginal tax rate to determine how much you save in taxes when you make a tax deduction e.g. after you make an RRSP contribution.
For example, if your taxable income is $100,000 and your RRSP contribution in 2020 is $10,000, you can expect a tax refund of $3,600 based on a marginal tax rate of 36%.
Alberta Tax Credit and Deductions
You can lower your taxes payable using applicable refundable and non-refundable tax credits available federally and provincially.
Popular non-refundable credits include the basic personal amount for eligible dependents, age amount, charitable donations, medical expenses, caregiver amount, public transit passes, and the first-time homebuyers credit.
A non-refundable tax credit can reduce your taxes to zero, however, you won’t get a refund if your credits exceed taxes owed.
Popular refundable tax credit includes the working income tax credit and Goods and Services Tax credit. Alberta also has the investor tax credit (AITC) and Alberta stock savings plan tax credit.
Refundable tax credits lower your taxes and if you don’t owe taxes, you get a refund.
Tax deductions lower your taxable income. Regular deductions applicable to Albertans include CPP contributions, employment insurance, RRSP contributions, and interest on loans.
How To File Your Tax Return in Alberta
The deadline for individuals to file their taxes each year is April 30. Self-employed folks get an extension until June 15.
If you have a modest income, CRA offers free tax clinics where volunteers complete your tax return for free. Alternatively, you can file your tax return using:
- Free tax software such as TurboTax.
- A paper tax return you can download from the CRA website.
- A paid tax preparation service such as HR Block.
Here’s an article with more details about free tax return software in Canada.