Canada vs US Tax — Side-by-Side Comparison for 2025
Canadian and US tax systems look similar on the surface — federal brackets plus state/provincial — but the details (payroll taxes, retirement accounts, capital gains, deductions) drive meaningful differences in take-home pay. This page compares federal + Ontario (Canada's most populous province) against federal + California (largest US state) at representative income levels, using 2025 CRA and IRS rates post-OBBBA.
Take-home on the same gross salary
Figures interpret the same nominal amount as CAD (Canada) and USD (US) for structural comparison — exchange rate is ~0.73 USD per CAD but this page is not a cost-of-living or purchasing-power comparison. Canada column uses federal + Ontario + CPP + EI. US column uses federal + California + FICA (SS/Medicare) + CA SDI (1.1%).
| Gross salary | CA fed tax | ON tax + levy | CPP + EI | CA take-home | US fed tax | CA state tax | FICA + SDI | US take-home | Gap |
|---|---|---|---|---|---|---|---|---|---|
| $50,000 | $4,911 | $2,481 | $3,587 | $39,021 | $3,872 | $1,245 | $4,375 | $40,508 | +$1,488 |
| $80,000 | $10,619 | $5,258 | $5,460 | $58,664 | $9,049 | $3,467 | $7,000 | $60,484 | +$1,820 |
| $120,000 | $19,108 | $10,166 | $5,508 | $85,219 | $17,867 | $7,187 | $10,500 | $84,446 | -$774 |
| $200,000 | $40,639 | $24,873 | $5,508 | $128,981 | $37,067 | $14,627 | $16,018 | $132,288 | +$3,307 |
Gap column shows US (CA) take-home minus Canada (ON) take-home on the same nominal gross. Excludes retirement (401(k) / RRSP) to isolate the tax-only effect. No-state-tax US states (TX, FL, NV, WA, TN) widen the US advantage by the entire state-tax column.
Federal income tax brackets — side by side
🇨🇦 Canada federal (2025)
- $0–$57,375: 15%
- $57,376–$114,750: 20.5%
- $114,751–$177,882: 26%
- $177,883–$253,414: 29%
- $253,415+: 33%
Basic Personal Amount $16,129 (2025). Provincial tax is additional — Ontario adds 5.05%–13.16% on top.
🇺🇸 US federal (2025, single)
- $0–$11,925: 10%
- $11,926–$48,475: 12%
- $48,476–$103,350: 22%
- $103,351–$197,300: 24%
- $197,301–$250,525: 32%
- $250,526–$626,350: 35%
- $626,351+: 37%
Standard deduction single $15,750 (OBBBA 2025). State tax is additional — CA adds 1%–12.3% (plus 1% Mental Health Services over $1M).
Key structural differences
| Feature | 🇨🇦 Canada | 🇺🇸 United States |
|---|---|---|
| Tax-free amount | BPA $16,129 (claimed as non-refundable credit) | Standard deduction $15,750 single / $31,500 MFJ |
| Top marginal (fed) | 33% over $253,414 | 37% over $626,350 (single) |
| Payroll tax (pension) | CPP 5.95% on $3,500–$71,300; CPP2 4% on $71,300–$81,200 (2025) | Social Security 6.2% on first $176,100 |
| Payroll tax (health) | None — public healthcare funded from general revenue | Medicare 1.45% on all wages + 0.9% above $200k single |
| Unemployment | EI 1.64% on first $65,700 (2025) | FUTA employer-paid (not on pay stub); state UI varies |
| Tax-deferred retirement | RRSP — 18% of earned income to $32,490 (2025) | 401(k) — $23,500 (50+ add $7,500; ages 60–63 add $11,250) |
| Tax-free retirement | TFSA — $7,000/yr (up to $102,000 cumulative in 2025) | Roth IRA — $7,000/yr (MAGI phase-out $150k single / $236k MFJ) |
| Capital gains | 50% inclusion at marginal rate (no separate CGT rates) | Long-term 0% / 15% / 20% + 3.8% NIIT above thresholds |
| Principal residence | Fully exempt (principal residence exemption) | $250k single / $500k MFJ exclusion after 2 of 5-year ownership |
| GST / sales tax | GST 5% + PST/HST (9%–15% combined) | No federal; state + local 0%–10.25% |
| Estate tax | No estate tax; deemed disposition at death (CGT on appreciation) | Federal estate tax above $15M (OBBBA 2025); some states add their own |
Retirement: RRSP vs 401(k), TFSA vs Roth IRA
RRSP and 401(k) are the tax-deferred cousins. Contributions reduce taxable income now, growth compounds untaxed, and withdrawals are fully taxable at marginal rates. US 401(k)s typically come with employer matching (~80% of plans), which Canadian RRSPs don't unless they're set up as Group RRSPs. The 2025 contribution limits are very close: RRSP $32,490 (18% of earned income), 401(k) $23,500 — but US catch-up provisions (+$7,500 at 50; +$11,250 at 60–63 under SECURE 2.0) make late-career contributions larger.
TFSA and Roth IRA are the tax-free cousins. Contributions are post-tax, but growth and qualified withdrawals are untaxed. TFSA is simpler (no income limits, re-contribute previously withdrawn amounts) and has a larger cumulative cap for long-time residents ($102,000 if you've never contributed and were 18+ in 2009). Roth IRA has a MAGI phase-out ($150k single / $236k MFJ for 2025) that shuts high earners out — backdoor Roth conversions are the common workaround.
If you have both US and Canadian tax obligations, TFSAs are a trap — the IRS does not recognize them as tax-advantaged, so growth and withdrawals are generally taxable on Form 1040. RRSPs are protected by the Canada–US tax treaty and IRS Rev. Proc. 2014-55 (no longer require Form 8891) but still report on Form 8938 / 3520 if balances exceed reporting thresholds.
If you're moving Canada → US
- Deemed disposition: CRA taxes you as if you sold most non-registered assets on emigration day. File Form T1161 (list of properties) and T1243 (deemed disposition of property). Principal residence and RRSP/TFSA are excluded from deemed disposition.
- TFSA warning: The IRS does not recognize TFSAs. Contributions while a US resident are treated as taxable, growth may be taxable annually, and many advisors recommend closing the TFSA before or during the move.
- RRSP handling: Keep it in Canada. Under the Canada–US treaty, growth is deferred; elect on Form 8938 / 3520 if required. Withdrawals are taxable in both countries with a foreign tax credit.
- Capital gains: US uses separate long-term rates (0% / 15% / 20%) — typically lower than Canada's 50% inclusion applied at marginal rate for higher earners.
If you're moving US → Canada
- No deemed sale: Canada doesn't tax US capital gains at entry — you get a stepped-up cost base equal to fair market value on the day you become resident.
- US citizenship tax: US citizens (and green card holders) remain subject to US tax on worldwide income regardless of residency. File Form 1040 every year, plus Form 2555 (foreign earned income exclusion up to ~$130k) or Form 1116 (foreign tax credit).
- 401(k) handling: Can stay in the US; periodic withdrawals under the Canada–US treaty qualify for reduced 15% US withholding. Lump-sum withdrawals face 30% US withholding.
- Higher marginal rates: Ontario + federal marginal rate tops out at ~53.5% vs. California + federal at ~50.3%. High-income Canadians often see 10+ percentage-point higher tax vs. no-state-tax US states.
Canada Income Tax Calculator
Federal + provincial on any salary across all 13 jurisdictions.
TFSA Calculator
Tax-free contribution room + projection; Roth IRA's Canadian cousin.
Province Comparison
Inter-provincial tax comparison — ON vs BC vs QC vs AB and more.
US Federal Income Tax Calculator
Sister site ustax.tools — 2026 federal brackets, standard deduction, filing status.
US Capital Gains Tax Calculator
Sister site ustax.tools — short vs long-term, 0/15/20% brackets, NIIT.
US State Income Tax Calculator
Sister site ustax.tools — 50-state comparison, no-tax states, brackets.
US FICA & Payroll Tax Calculator
Sister site ustax.tools — Social Security + Medicare, wage base, self-employed.
Sources
Canadian rates: CRA for 2025 federal brackets, BPA, CPP/EI rates; Ontario Ministry of Finance for provincial brackets. US rates: IRS Rev. Proc. 2024-40 for 2025 federal brackets as modified by OBBBA 2025; California FTB for state brackets. Retirement account limits: IRS Notice 2024-80 (2025 benefits and contributions).