Canada vs. US taxes: full comparison for 2025
US taxes vs. taxes in Canada? There’s a lot to unpack. Income tax rates, payroll deductions, and tax incentives all play a role. If you’re an expat, cross-border worker, or business owner, understanding these differences is essential.
Both countries use progressive tax systems – the more you earn, the more you pay. But beyond that, their tax structures and benefits vary widely. In this article, we’ll break down Canada’s tax system and compare it with the US tax system.
This article is brought to you by Taxes for Expats (TFX) – a top-rated tax firm serving US citizens, residents, and anyone with US tax obligations, both at home and abroad. Planning to move to Canada and need help with your US return or tax planning? Learn more about the expat tax services we offer.
Tax comparison between the US and Canada
Canada and the United States use progressive income tax systems, but their tax rates vary. Both countries also levy income taxes at federal and subnational levels – Canada at the provincial level, and the US at the state level. However, provincial tax rates in Canada are more consistent than US state tax rates, which range from zero in some states to quite high in others.
Income tax rates: Canada vs. US
| Canada | United States | ||
|---|---|---|---|
| Taxable income (USD) | Tax rate (%) | Taxable income (USD) | Tax rate (%) |
| 0 - 41,589 | 15 | 0 - 11,925 | 10 |
| 41,589 - 83,178 | 20.5 | 11,926 - 48,475 | 12 |
| 83,178 - 128,476 | 26 | 48,476 - 103,350 | 22 |
| 128,476 - 183,528 | 29 | 103,351 - 197,300 | 24 |
| 183,528 and above | 33 | 197,301 - 250,525 | 32 |
| 250,526 - 626,350 | 35 | ||
| 626,351 and above | 37 | ||
The Canadian brackets have been adjusted to reflect the US dollar equivalent based on the current exchange rate. These figures are approximate and intended for comparative purposes. As of May 30, 2025, the exchange rate is approximately 1 CAD = 0.7241 USD.
In Canada, provincial taxes add an extra layer on top of federal taxes, impacting your overall tax burden.
| British Columbia | Alberta | Ontario | Quebec | ||||
|---|---|---|---|---|---|---|---|
| Taxable income (CAD) | Tax rate (%) | Taxable income (CAD) | Tax rate (%) | Taxable income (CAD) | Tax rate (%) | Taxable income (CAD) | Tax rate (%) |
| 0 - 49,279 | 5.06 | 0 - 151,234 | 10 | 0 - 52,886 | 5.05 | 0 - 53,255 | 14 |
| 49,279 - 98,560 | 7.7 | 151,234 - 181,480 | 12 | 52,886 - 105,775 | 9.15 | 53,255 - 106,495 | 19 |
| 98,560 - 113,158 | 10.5 | 181,481 - 241,974 | 13 | 105,775 - 150,000 | 11.16 | 106,495 - 129,590 | 24 |
| 113,158 - 137,407 | 12.29 | 241,974 - 362,961 | 14 | 150,000 - 220,000 | 12.16 | 129,590 and above | 25.75 |
| 137,407 - 186,306 | 14.7 | 362,961 and above | 15 | 220,000 and above | 13.16 | ||
| 186,306 - 259,829 | 16.8 | ||||||
| 259,829 and above | 20.5 | ||||||
Example calculation: $60,000 income in Canada vs. the US (2025)
- Canada (Ontario resident): Federal tax is about $9,144, plus provincial tax around $3,470. Total income tax: approximately $12,614.
- United States (California resident): Federal tax is roughly $6,962, plus state tax near $2,427. Total income tax: about $9,389.
Corporate taxes
Where a company chooses to do business often depends on corporate taxes. Canada and the US tax corporations, both require corporations to file tax returns federally and at the provincial or state level.
Corporate taxes in Canada
Federal corporate tax rates: The basic federal rate is 38%, reduced to 28% after a 10% deduction, with the net rate currently at 15%. The Small Business Deduction (SBD) lowers the rate to 9% for Canadian-controlled private corporations (CCPCs) on active business income up to their business limit.
Provincial corporate tax rates: Provinces add corporate taxes on top of the federal rate, with lower rates for income eligible for the SBD and higher rates for other income.
For example, combined rates on eligible income in 2024:
- Ontario: 12.2% (3.2% provincial + 9% federal)
- British Columbia: 11% (2% provincial + 9% federal)
- Newfoundland and Labrador: 11.5% (2.5% provincial + 9% federal)
Quebec and Alberta administer their corporate tax systems separately from the Canada Revenue Agency (CRA).
Corporate taxes in the United States
Federal corporate tax rate: a flat 21% applies to all corporations.
State corporate tax rates: Added on top of the federal rate, state rates vary widely:
- lowest: North Carolina at 2.5%
- highest: Minnesota at 9.8%
- six states have no corporate income tax: Nevada, South Dakota, Texas, Washington, Wyoming, and Ohio (which uses a gross receipts tax instead).
Many small businesses in the US, like S corporations and LLCs, are pass-through entities, taxed at individual rates rather than corporate rates.
Capital gains taxes
In Canada, only a portion of the capital gain is taxable, based on the inclusion rate. Until June 25, 2024, 50% of the gain is taxable for individuals and corporations. After that date, gains over $250,000 for individuals and all gains for corporations are taxed at a higher inclusion rate of 66.67%.
In the US, capital gains tax depends on how long you hold an asset. Short-term gains (held 1 year or less) are taxed as ordinary income (10%37%). Long-term gains (held more than 1 year) benefit from lower rates of 0%, 15%, or 20%, depending on income. Additional taxes include the Net Investment Income Tax (3.8%) on high earners, plus varying state taxes.
| Rate (%) | Single Filers (USD) | Married Filing Jointly (USD) | Head of Household (USD) |
|---|---|---|---|
| 0 | 0 - 48,350 | 0 - 96,700 | 0 - 64,750 |
| 15 | 48,351 - 533,400 | 96,701 - 600,050 | 64,751 - 566,700 |
| 20 | 533,400 and above | 600,050 and above | 566,700 and above |
The table below highlights the key differences in how each country taxes capital gains, including rates, exemptions, and holding period requirements.
| Aspect | Canada | US |
|---|---|---|
| Taxable portion | 50% (rising to 66.67% on gains > $250,000 after June 2024). | 100% of capital gains are taxable. |
| Rates | The marginal tax rate on the taxable portion of the gain. | 0%, 15%, or 20% based on income (long-term gains). |
| Short-term gains | No distinction between short- and long-term gains. | Taxed as ordinary income at rates of 10% to 37%. |
| Additional taxes | None are directly linked to capital gains. | NIIT adds 3.8% for higher earners; state taxes may apply. |
Canada taxes only part of your capital gains, generally resulting in lower effective rates, though higher earners face increased rates starting mid-2024. The US offers preferential rates for long-term gains but includes additional taxes and state variations.
Sales taxes
Canada has a federal Goods and Services Tax (GST) on most goods and services. Some provinces combine the GST with their provincial sales tax into a Harmonized Sales Tax (HST). Most goods and services are subject to GST or HST. Some basic products and services are exempt or zero-rated.
In the US, there is no federal sales tax. Instead, sales taxes are set at the state and local levels, resulting in a wide range of rates and rules. Sales tax applies mainly to tangible goods, with many states exempting groceries, prescription drugs, etc.
How sales taxes are applied in purchases:
- Canadian GST/HST is generally added at the point of sale and collected by retailers, then remitted to the government.
- In the US, sales taxes vary by location, with state and local governments imposing their own rates. Businesses must calculate and collect the appropriate tax based on where a sale occurs, making compliance more complex.
Estate and inheritance taxes
Canada does not have a formal estate or inheritance tax. Instead, when someone dies, their assets are treated as if sold at fair market value on the date of death. This deemed disposition triggers capital gains taxes on any appreciation. The estate pays these taxes before transferring assets to beneficiaries.
Probate fees or estate administration taxes may also apply, varying by province or territory. Some capital gains exemptions, like for a principal residence or small business, may reduce the tax burden.
The US imposes a federal estate tax on the value of an estate above exemption thresholds. In 2024, estates under the exemption limit are not taxed. Amounts exceeding the limit face rates up to 40%. The estate is responsible for paying these taxes before distribution. Many states impose their own estate or inheritance taxes with varying rates and exemptions.
Property taxes
In Canada, property taxes are primarily administered at the municipal level. Rates differ across provinces and cities. For example, in 2024, annual property taxes on a $100,000 home ranged from about $250 in Vancouver, BC, to $620 in Toronto, Ontario, and $800 in Montreal, Quebec.
In the US, property taxes are collected locally by counties, cities, and school districts. Rates and assessment methods vary not only by state but also within jurisdictions, leading to significant regional differences.
Property tax rates tend to be higher in some US states compared to Canadian cities, especially in parts of the Northeast and Midwest. However, variability within both countries means your exact tax depends heavily on local rates.
In the US, homeowners can often deduct property taxes on their federal income tax returns, subject to limits. Canada does not offer a federal property tax deduction, but some provinces provide credits or relief programs for certain taxpayers.
Social security and payroll contributions
Canada’s system includes the Canada Pension Plan (CPP) for retirement and Employment Insurance (EI) for temporary benefits. In the US, Social Security provides retirement and disability benefits, while Medicare covers healthcare for those 65 and older.
Both countries require contributions from employees and employers.
Retirement benefit implications
Benefits differ in amount and eligibility. CPP and Social Security provide monthly retirement income based on lifetime contributions, but formulas and payout amounts vary. Medicare offers healthcare coverage after age 65, while Canada’s publicly funded healthcare system covers most medical services regardless of age.
| Aspect | Canada | US |
|---|---|---|
| Social security programs | Canada Pension Plan (CPP) provides retirement, disability, and survivor benefits; contributions split between employers and employees. Employment Insurance (EI) offers temporary income support during unemployment, illness, or parental leave. | Social Security provides retirement, disability, and survivor benefits funded by FICA payroll taxes. Supplemental Security Income (SSI) provides federal payments ($967/month for individuals, $1,450/month for couples in 2025) to aged, blind, and disabled individuals with low incomes. |
| Healthcare coverage | Universal healthcare (Medicare) covers all residents for medically necessary services with no direct cost at the point of care. | Mixed public-private system: Public programs (Medicare, Medicaid) cover specific groups, while others rely on employer-sponsored or private insurance. Many remain uninsured or underinsured. |
| Healthcare funding | Primarily funded through taxes, ensuring access for all residents regardless of income. | Funded through a combination of government programs, private insurance premiums, and out-of-pocket payments, often tied to employment. |
| Access to healthcare | Canadians enjoy equitable access with minimal direct costs. Basic services are covered, but private insurance is used for additional needs (e.g., dental care, and prescriptions). | Americans often face high out-of-pocket costs, including deductibles, co-pays, and uncovered services, even with insurance. |
| Cost to individuals | Minimal or no direct payments for essential services; private insurance is optional for extras. | Individuals often pay higher costs, including premiums, deductibles, and co-pays. |
| Public program highlights | - Medicare: Administered by provinces and territories, covering essential hospital and physician services. - Funded through taxation. |
- Medicare: Covers seniors. - Medicaid: Supports low-income individuals. - Public programs leave significant gaps in coverage, requiring private insurance. |
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Tax benefits and credits
Both Canada and the US offer various tax credits and deductions to help reduce the tax burden. The way these benefits are structured and applied differs significantly between the two countries.
| Aspect | Canada | US |
|---|---|---|
| Child/family benefits | Canada Child Benefit (CCB): Tax-free monthly payments for families with children under 18. | Child Tax Credit (CTC): Up to $2,000 per child under 17, with $1,400 refundable. |
| Sales tax relief | GST/HST credit: Quarterly payments for low- to moderate-income families to offset sales tax. | No equivalent federal sales tax credit, as sales taxes are managed at the state level. |
| Disability support | Disability Tax Credit (DTC): Non-refundable credit for individuals with severe impairments. | No specific disability tax credit, though deductions for medical expenses may apply. |
| Low-income worker benefits | Canada Workers Benefit (CWB): Refundable credit to assist and encourage low-income workers. | Earned Income Tax Credit (EITC): Refundable credit for low- to moderate-income workers, especially those with children. |
| Education benefits | Canada Training Credit (CTC): Refundable credit for training and skills development. | - American Opportunity Tax Credit (AOTC): Up to $2,500 for the first 4 years of college. - Lifetime Learning Credit (LLC): Up to $2,000 per return for tuition and educational expenses. |
| Standard deduction | Not applicable in Canada. |
Standard Deduction (2025): - $15,000 for single filers. - $30,000 for joint filers. - $22,500 for heads of household. |
| Homeowner benefits | Mortgage interest is not deductible in Canada. | Mortgage Interest Deduction: Deduct interest on the first $750,000 of mortgage debt ($375,000 for married filing separately). |
| State and local taxes | No specific equivalent deduction for property or local taxes. | SALT Deduction: Deduct up to $10,000 ($5,000 if married filing separately) for state/local property and income or sales taxes. |
Real story: How we helped a US-Canadian expat recover $30,000 lost to double taxation
When John (name changed for privacy) moved from Canada to the US, he faced a $30,000 IRS bill, despite having already paid full tax in Canada on his severance. The issue? His previous tax preparer failed to claim the Foreign Tax Credit (FTC) on his US tax return, and John was double taxed on the same income in two countries.
Our team at Taxes for Expats reviewed John’s federal and state returns, correctly applied the FTC, and filed amendments. We also helped him switch from Married Filing Separately to Married Filing Jointly, unlocking an additional $2,000 in savings. The result: over $32,000 in total tax relief.
Read the full case study: How we helped a US-Canadian expat recover $30,000 lost to double taxation
Need help with cross-border taxation?
Cross-border tax rules can be complex, but with expert guidance, managing your US tax obligations alongside Canadian taxes doesn’t have to be overwhelming. Whether you’re a US citizen, a green card holder, or a Canadian resident with US tax responsibilities, Taxes for Expats will guide you through your unique situation with clear and practical advice.
FAQ
It depends. The Canada-US tax treaty can help prevent double taxation. For example, you may be able to claim foreign tax credits for taxes paid in the other country.
Canadian federal and provincial income tax rates tend to be higher, especially for middle- and high-income earners. Some US states have low or no income tax, which lowers overall taxes for residents there. However, Canada’s higher taxes fund public healthcare and social services, which many Americans pay for separately.
No. Unlike the US, Canada does not allow a mortgage interest deduction for your principal residence.
Canada: CPP and OAS benefits are taxable as income.
US: Social Security benefits are taxable based on income level, with up to 85% subject to tax for high earners.
No. There are no inheritance or estate taxes in Canada, but capital gains taxes may apply at death.
The Canada Child Benefit (CCB) provides tax-free monthly payments to families with children under the age of 18.
The US Child Tax Credit (CTC) provides a refundable credit of up to $2,000 per child.
Canada. Health care is publicly funded, providing universal access at no direct cost.
The US. Expats often need private insurance, which can be expensive.
