Canada Taxes vs. US: Facts and Statistics (2024)
Canadians generally pay higher taxes than Americans, primarily due to Canada‘s extensive social services, including universal healthcare. Research indicates that these taxes may also increase due to the current government’s program spending.
Canada Taxes vs. US: The Facts
Maximum Tax Rates
In 2024, Canada’s top federal income tax rate is 33%, while the US’s top federal rate is 37%. However, when combining federal and provincial/state taxes, Canadians often face higher marginal rates across various income levels.
Income Tax Brackets
The US has seven federal income tax brackets, ranging from 10% to 37%. Canada has only five federal brackets, ranging from 15% to 33%.
Social Security Contributions
In 2024, Americans will pay a 7.65% tax on Social Security income up to $168,600. In Canada, employees contribute 5.95% to the Canada Pension Plan (CPP) on earnings up to C$66,600.
Sales Tax
Canada imposes a 5% federal Goods and Services Tax (GST), with some provinces adding a Provincial Sales Tax (PST), leading to combined rates between 5% and 15%. The US does not have a federal sales tax. Instead, some states levy their own sales taxes, ranging from 0% to over 9%.
Corporate Tax Rates
Canada’s corporate tax system comprises a federal base rate of 15%, with combined federal and provincial corporate tax rates ranging from 26.5% to 31%, depending on the province. In the US, the federal corporate tax rate is 21%, with state taxes adding approximately 0% to 12%, resulting in a combined rate between 21% and 33%.
Capital Gains Tax
Previously, in Canada, 50% of capital gains were taxable at an individual’s marginal tax rate. Starting June 25, 2024, the inclusion rate increased to two-thirds for capital gains exceeding $250,000 annually for individuals and for all capital gains realized by corporations and most trusts.
In the US, long-term capital gains are taxed at rates of 0%, 15%, or 20%, depending on taxable income and filing status.
Unemployment Insurance
In 2024, Canadian employees contribute to Employment Insurance (EI) at a rate of 1.66% on earnings up to C$63,200. Employers contribute at a rate of 2.32%. (These rates will increase slightly in 2025.) In the US, unemployment insurance is primarily funded by employers through federal and state taxes, with rates varying by state and employer experience.
Estate Taxes
Canada does not have an estate tax. Instead, Canada treats death as a deemed disposition of assets, potentially triggering capital gains tax. The US imposes a federal estate tax on estates exceeding $13.61 million in 2024, with rates up to 40%.
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