The #1 question every new freelancer asks: "How much of my income goes to taxes?"
The short answer: 25–40% of your net income, depending on your province and how much you earn. That's significantly more than most people expect — and more than employees pay on the same gross income.
This guide breaks down exactly where that money goes, with real calculations at every income level from $30,000 to $150,000.
The Three Taxes Freelancers Pay
Unlike employees who see one deduction on their paycheque, freelancers pay three separate taxes:
Federal Income Tax
Provincial Income Tax
CPP (Both Halves)
HST/GST (If Registered)
2025 Federal Tax Brackets (Filed in 2026)
| Taxable Income | Federal Rate | Tax on Bracket |
|---|---|---|
| $0 – $57,375 | 15% | Up to $8,606 |
| $57,375 – $114,750 | 20.5% | Up to $11,762 |
| $114,750 – $158,468 | 26% | Up to $11,367 |
| $158,468 – $220,000 | 29% | Up to $17,844 |
| Over $220,000 | 33% | — |
The basic personal amount for 2025 is $16,129 — your first $16,129 of income is effectively tax-free (14.5% credit = $2,339 off your federal 2025 tax, thanks to the Bill C-4 rate cut).
Provincial Tax Rates (Selected Provinces)
| Province | Lowest Rate | Highest Rate | Basic Personal Amount (2025) |
|---|---|---|---|
| Ontario | 5.05% | 13.16% | $12,747 |
| British Columbia | 5.06% | 20.5% | $12,932 |
| Alberta | 8% | 15% | $22,323 |
| Manitoba | 10.8% | 17.4% | $15,780 |
| Saskatchewan | 10.5% | 14.5% | $19,491 |
| Nova Scotia | 8.79% | 21% | $11,744 |
| New Brunswick | 9.4% | 19.5% | $13,396 |
| Quebec runs its own income tax system through Revenu Québec (rates 14%–25.75%). | |||
Real Tax Calculations: Ontario Freelancer
Here's exactly what a freelancer in Ontario pays at different net income levels for the 2025 tax year (after business deductions; the CPP deduction and credit and the basic personal amounts are already applied — computed with our verified CRA engine):
$40,000 Net Income
| Federal income tax | $2,831 |
| Ontario income tax (incl. surtax) | $1,157 |
| Ontario Health Premium | $388 |
| CPP + CPP2 (both halves) | $4,344 |
| Total tax | $8,720 |
| Effective rate | 21.8% |
| Take-home | $31,280 |
$60,000 Net Income
| Federal income tax | $5,386 |
| Ontario income tax (incl. surtax) | $2,177 |
| Ontario Health Premium | $600 |
| CPP + CPP2 (both halves) | $6,724 |
| Total tax | $14,887 |
| Effective rate | 24.8% |
| Take-home | $45,113 |
$80,000 Net Income
| Federal income tax | $9,024 |
| Ontario income tax (incl. surtax) | $3,844 |
| Ontario Health Premium | $750 |
| CPP + CPP2 (both halves) | $8,764 |
| Total tax | $22,381 |
| Effective rate | 28.0% |
| Take-home | $57,619 |
$100,000 Net Income
| Federal income tax | $13,104 |
| Ontario income tax (incl. surtax) | $5,665 |
| Ontario Health Premium | $750 |
| CPP + CPP2 (both halves) | $8,860 |
| Total tax | $28,379 |
| Effective rate | 28.4% |
| Take-home | $71,621 |
$150,000 Net Income
| Federal income tax | $24,990 |
| Ontario income tax (incl. surtax) | $13,416 |
| Ontario Health Premium | $750 |
| CPP + CPP2 (both halves) | $8,860 |
| Total tax | $48,016 |
| Effective rate | 32.0% |
| Take-home | $101,984 |
Freelancer vs Employee: Side-by-Side Comparison
Here's why freelancers feel the tax pinch more — at $75,000 gross income in Ontario:
| Employee ($75K salary) | Freelancer ($75K net) | |
|---|---|---|
| Federal tax | $8,631 | $10,015 |
| Provincial tax | $4,039 | $4,893 |
| CPP (your share) | $4,034 | $8,068 |
| EI premiums | $1,077 | $0 (not eligible) |
| Total deductions | $17,781 | $22,976 |
| Difference | Freelancer pays ~$5,200 more | |
The Deduction Effect: How Expenses Lower Your Tax
This is the most important concept for freelancers to understand. You're taxed on net income (revenue minus expenses), not gross revenue.
Example: $80,000 Gross Revenue
| Gross revenue | $80,000 |
| Home office (rent, utilities, internet) | −$6,000 |
| Vehicle expenses | −$3,500 |
| Software & subscriptions | −$2,400 |
| Professional development | −$1,500 |
| Supplies, meals, phone | −$1,600 |
| RRSP contribution | −$5,000 |
| Taxable income | $60,000 |
Tax savings from $20K in deductions: approximately $6,500–$8,000 depending on your marginal rate.
This is why tracking every business expense matters. Our free Expense Categorizer auto-sorts your bank transactions into T2125 categories so you don't miss anything.
7 Strategies to Reduce Your Freelancer Tax Bill
1. Claim Every Eligible Deduction
The average freelancer misses $3,000–$5,000 in deductions. Use our complete deduction checklist and categorizer tool.
2. Maximize RRSP Contributions
Every dollar contributed to your RRSP reduces taxable income dollar-for-dollar. At a 30% marginal rate, a $10,000 RRSP contribution saves $3,000 in tax. RRSP guide for freelancers →
3. Use the HST Quick Method
If you collect HST, the Quick Method lets you remit a lower percentage (typically 8.8% in Ontario) and keep the difference. On $100K revenue, that's roughly $4,200 in your pocket vs. the regular method. HST guide →
4. Claim Home Office Properly
Dedicated workspace? You can deduct rent/mortgage interest, utilities, property tax, insurance, and maintenance proportional to your workspace size. Home office guide →
5. Track Vehicle Expenses
Keep a mileage log and claim gas, insurance, repairs, lease payments, or CCA on a purchased vehicle — proportional to business use. Vehicle deduction guide →
6. Pay Quarterly Instalments
CRA charges interest if you owe more than $3,000 and don't make instalments. Pay quarterly to avoid surprises and interest charges. Not sure if that's you? The free Instalment Checker gives you a verified verdict and your per-deadline amounts in 30 seconds. Instalment guide →
7. Consider Incorporation (At Higher Income)
Once you're consistently earning $120K+, incorporation can save significant tax through the small business deduction (12.2% combined rate in Ontario vs. 29%+ personal). Incorporation guide →
The "Set Aside" Rule
💰 How Much to Save From Each Payment
| Your Expected Net Income | Set Aside This % |
|---|---|
| Under $50,000 | 25% |
| $50,000 – $100,000 | 30% |
| $100,000 – $150,000 | 33% |
| Over $150,000 | 35–40% |
Open a separate high-interest savings account (EQ Bank, Tangerine, etc.) and transfer this percentage from every client payment. When April 30 arrives, the money is already there.
If you also collect HST, set aside an additional 5–13% (depending on your province and whether you use the Quick Method) for HST remittance.
Don't Forget These Dates
| Deadline | What |
|---|---|
| March 1 | RRSP contribution deadline (for 2025 tax year) |
| April 30 | Tax payment due (interest starts May 1) |
| June 15 | Filing deadline for self-employed |
Full calendar: Every Tax Deadline for Self-Employed Canadians
Stop Guessing. Get Organized.
Our Expense Tracker, HST Calculator, and Year-End Kit handle the math so you know exactly what you owe — before April 30.
Get the FreelancerTax Bundle — $99Related Guides
- How to File Taxes as a Freelancer: Step-by-Step
- 70+ Tax Deductions for Canadian Freelancers
- CPP for Self-Employed Canadians
- Bookkeeping 101 for Freelancers
- 10 CRA Audit Red Flags
Last updated: February 23, 2026. Tax calculations are estimates based on 2025 federal and Ontario rates. Actual amounts vary by province, credits, and individual circumstances. This guide is for informational purposes only — consult a qualified tax professional for advice specific to your situation.