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Angie Mohr, CPA, CA, and CMA, has 18+ years of experience as a freelance finance writer. She is the author of Money$marts and Piggy Banks to Paycheck.
Updated August 29, 2024 Reviewed by Reviewed by David KindnessDavid Kindness is a Certified Public Accountant (CPA) and an expert in the fields of financial accounting, corporate and individual tax planning and preparation, and investing and retirement planning. David has helped thousands of clients improve their accounting and financial systems, create budgets, and minimize their taxes.
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The differences in income tax brackets, taxable income amounts, the services provided, and costs beyond taxes between Canada and the United States make it difficult to draw broad conclusions about which country has higher taxes. How much tax you pay in each country depends on your income bracket, available tax deductions, and the state or province in which you live.
Statistics-gathering agencies in both the United States and Canada publish averages of income taxes paid. However, comparing the two sets of numbers is like comparing the stats of a hockey player with those of a basketball player. They're based on different premises and reflect different factors. Using an average is also problematic because extreme wealth inequality skews the data on both ends.
There is also a large discrepancy between the services provided to taxpayers. For example, Canadian national healthcare is funded by taxes, but it has few additional costs for residents. Americans do not have to pay taxes to fund most of their healthcare, but the cost of healthcare for an individual in the United States is significantly higher than in other wealthy countries.
The combination of these factors means that there is no single answer to who pays more tax. People who are considering moving for tax reasons must assess their financial situations individually to determine which tax system is the best for them.
Lower-income Canadians generally pay less in taxes than lower-income Americans for the services they receive. Wealthy Americans, on the other hand, often pay less in taxes than wealthy Canadians through a combination of deductions, credits, and tax-reduction strategies.
U.S. federal income tax brackets range from 10% to 37% for individuals as of 2024. The range is 15% to 33% in Canada.
| U.S. Tax Federal Income Tax Rates 2024 | ||
|---|---|---|
| Income Tax Rate | Income Single Filer | Income Married Filing Jointly |
| 10% | $11,600 or less | $23,200 or less |
| 12% | over $11,600 | over $23,200 |
| 22% | over $47,150 | over $94,300 |
| 24% | over $100,525 | over $201,050 |
| 32% | over $191,950 | over $383,900 |
| 35% | over $243,725 | over $487,450 |
| 37% | over $609,350 | over $731,200 |
The lowest tax bracket in the U.S. is 10% for individuals with incomes of $11,600 or less in 2024. It jumps to a 12% bracket for those with incomes of more than $11,600 and to 22% for those who earn more than $47,150.
The U.S. has a variety of income deductions and tax credits available, including a standard deduction of $14,600 for single filers, $21,900 for heads of households, and $29,200 for married couples filing jointly. These deductions and credits can lower the income tax a filer must pay. Wealthy Americans, in particular, often pay taxes at a much lower rate than their income tax bracket due to deductions and lower taxes on sources of income such as capital gains.
At 15%, the lowest Canadian bracket in 2024 is higher than the lowest U.S. tax bracket. This rate applies to incomes up to $55,867 in Canadian dollars. The next highest tax bracket, 20.5%, applies to incomes up to $111,733 in Canadian dollars.
| Canadian Federal Income Tax Rates 2024 | |
|---|---|
| Income Tax Rate | Individual Income |
| 15% | $55,867 or less |
| 20.5% | $55,867 - $111,733 |
| 26% | $111,733 - $173,205 |
| 29% | $173,205 - $246,752 |
| 33% | over $246,752 |
Canadian tax policy does not include a separate income threshold for married couples. However, partners can use certain tax rules to transfer income amounts or any unused portion of their basic personal amount (similar to the U.S. standard deduction) to a spouse.
| Comparing Canadian and U.S. Federal Income Tax Rates | |||
|---|---|---|---|
| Income In $CAD | Income In $USD | Canadian Tax Rate | U.S. Tax Rate |
| $20,000 | $14,842 | 15% | 12% |
| $50,000 | $37,105 | 15% | 12% |
| $100,000 | $74,211 | 20.5% | 22% |
| $200,000 | $148,423 | 29% | 24% |
| $500,000 | $371,058 | 33% | 35% |
| $800,000 | $593,692 | 33% | 35% |
| $1,000,000 | $742,115 | 33% | 37% |
Comparing state and provincial income taxes is more difficult. In the United States, state taxation is completely outside the federal tax system. Each state has its own tax laws regarding deductions and credits. Some states, such as Florida and Alaska, have no state income tax at all.
All Canadian provinces and territories, by contrast, levy an income tax. Provincial income taxes are coordinated with the federal tax system in Canada, except in Quebec. They're based on a percentage of federal tax. The provinces have the same allowable deductions and income rules as the federal system. Each province also has additional credits and incentives.
It's not technically an income tax, but Canadians pay employment insurance (EI) premiums based on their employment income. EI premiums are paid by employees and employers. Employees pay 1.66% of maximum gross employment income of C$63,200 in tax year 2024. In the U.S., the Federal Unemployment Tax Act (FUTA) is levied exclusively on employers.
It's important to note, however, that Canada offers more robust unemployment benefits than the U.S. does. This also includes extended pregnancy leave and other parental leave as well as paid time off for compassionate care. In the United States, there is no federally mandated paid pregnancy or parental leave. The Family and Medical Leave Act (FMLA) in the U.S. covers only unpaid leave for certain family and medical reasons.
The Social Security benefits that kick in at retirement in the U.S. are paid out based on what individuals have paid into the system throughout their working lives. Canada has a similar system in place with its Canada Pension Plan (CPP).
American employees pay 6.2% of their wages into Social Security and 1.45% into Medicare for a total of 7.65%. The Social Security tax is capped at an income level of $168,600 annually in 2024. Income over this amount isn't taxed for Social Security. The Medicare tax has no income cap.
Canadian employees pay 5.95% of their gross employment income into CPP up to C$65,000. Medicare-style benefits are included as part of the country's healthcare plan.
The Old Age Security (OAS) program is Canada's largest pension program and it's funded by general tax revenues. The OAS pension is taxable income that's available to people who are age 65 or older, who meet Canada's legal status and residency requirements, and who don't exceed maximum income caps.
In Canada, medical services are part of the country's health plan, which is partially paid for through income taxes. Everyone has equal access to medical facilities, practitioners, and procedures at no additional cost under this plan, but only medically necessary services are covered. Residents only pay for non-covered care out-of-pocket or through a supplemental insurance policy. Non-covered care in Canada includes:
In the U.S., healthcare must be paid for out-of-pocket or through a combination of health insurance coverage and out-of-pocket costs. All Americans contribute to Medicare in the U.S. throughout their working years. Medicare helps cover healthcare costs when people reach age 65.
Monthly premiums for U.S. health insurance plans vary based on several factors including the state you live in, your age, and whether you have employer coverage. The average monthly premium for a plan for a 21-year-old, purchased through the Healthcare.gov Marketplace, is $376 in 2024, increasing to $1,559 for a family of four. This includes copays and deductibles.
The lowest U.S. tax bracket is 10% for income up to $11,600 in tax year 2024. It's 15% on the initial C$55,867 (Canadian dollars) in Canada.
The systems offer similar approaches. Working people in both countries pay into government retirement funds throughout their working lives, but the amount they pay differs. Americans pay a tax of 7.65% into Social Security on up to $168,600 of their income in tax year 2024. That 7.65% includes Medicare contributions for which there's no income cap. Canadians pay a tax of 5.95% on up to C$65,000 (Canadian dollars).
Yes. Every Canadian territory and province levies income taxes. Canadians could potentially pay more in income taxes overall than some Americans because seven U.S. states levy no income taxes as of 2024: Wyoming, Texas, Tennessee, South Dakota, Nevada, Florida, and Alaska.
Determining whether Canadians pay more in income taxes than Americans requires an analysis of the benefits received in exchange for taxes paid and out-of-pocket costs. Each taxpayer's personal situation can help determine whether they would be financially better off living in one country or the other, along with many other factors.
