There are going to be some changes to Canada's tax brackets as we move into 2023. These changes could impact how you’re taxed when you file your 2023 income tax returns next year.
Every year, Canada incrementally changes the federal income tax brackets to account for inflation. These tax rates, along with other benefits, tax credits, and payments, are indexed to the inflation rate. Since inflation increased dramatically in 2022, the tax brackets saw considerable changes and were increased by 6.3% for 2023.
For example, imagine a scenario where tax brackets aren’t indexed to inflation for 50 years. By then, wages will be much higher, and nearly everyone will be in the highest tax bracket, even if they are low-income earners. By increasing tax brackets, the government ensures that lower-income earners are not unfairly taxed at a high rate due to inflation.moving into 2024, likely resulting in a smaller adjustment to the federal income tax brackets.
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