Self-employed income tax: how to calculate what you'll owe

This guide gives you a method for calculating a self-employed person's income tax, with fictional examples. It doesn't replace your income tax return or advice suited to your situation. And if you earn less than $30,000, read the section that applies to you: you may still owe tax.

Just getting started? Begin with your first-year obligations as a self-employed person in Quebec. You'll see what to set up before you even think about the calculation.

What amount do you pay income tax on?

Your income tax is calculated on your net business income. That's what's left of your business income once you subtract the expenses you incurred to earn it.

Always work with amounts before taxes. The GST and QST you add to your invoices aren't your income: you collect them for the governments.

Your taxable income is then that net income, minus certain deductions. For example, your contributions to the Quebec Pension Plan (QPP) and the Quebec Parental Insurance Plan (QPIP) give you a deduction. The rates apply to this taxable income.

Two income taxes add up:

• federal income tax, administered by the Canada Revenue Agency (CRA);
• Quebec income tax, administered by Revenu Québec.

Which rates apply in 2026?

Federal and Quebec rates are progressive. Each rate applies only to the portion of your income that falls within its bracket. Moving into a higher bracket doesn't raise the tax on all your income, only on the part above it.

Federal income tax 2026

The first-bracket rate has come down: it was 15%, was set at 14.5% for 2025 and drops to 14% starting in 2026.

Quebec income tax 2026

Two reductions then apply.

• Non-refundable tax credits. These are amounts that lower your tax without ever creating a refund. The main one is the basic personal amount. Federally, it reaches $16,452 in 2026 (maximum amount). The credit is worth 14% of that amount, or $2,303.28. Quebec also grants a basic personal amount, which reduces your Quebec income tax.
• The Quebec abatement. As a Quebec resident, your federal income tax is reduced by 16.5% in 2026.

How do you do the calculation, step by step?

Fictional example. You're a self-employed graphic designer in Quebec. In 2026, you invoice $60,000 before taxes. Your business expenses come to $10,000. You have no other income.

To keep things simple, the example subtracts neither the Quebec credits nor the deduction for contributions. The result is a cautious ceiling: your actual tax will be lower.

Next, add your contributions to government plans. On $50,000 of net income, in 2026 they come to about $5,859 for the QPP and $382 for the QPIP. The detailed calculation is in our article on the QPP and QPIP contributions to plan for when you work for yourself.

In total, for this example:

• federal income tax: $3,922;
• Quebec income tax, before credits: $7,000;
• QPP: $5,859;
• QPIP: $382.

That's about $17,163 at most, close to 29% of what you invoice before taxes. Depending on your situation, other contributions may be added, such as those to the Health Services Fund or the Quebec public prescription drug insurance plan.

What if you earn less than $30,000?

There's no $30,000 threshold for income tax. Federally and in Quebec, the first bracket starts at the first dollar of taxable income. Your credits, especially the basic personal amount, are what keep tax low on a small income.

If that figure comes from a conversation about GST and QST, keep in mind that sales taxes follow their own rules, separate from income tax.

Fictional example. Your 2026 net business income is $25,000.

1. Federal income tax: $25,000 × 14% = $3,500. Minus the basic credit of $2,303.28, that leaves $1,196.72. Minus the Quebec abatement ($197.46), you get about $999.
2. Quebec income tax: $3,500 before credits, then reduced by the Quebec basic personal amount.
3. QPP: ($25,000 − $3,500) × 12.6% = $2,709.
4. QPIP: $25,000 × 0.764% = $191.

In this example, your contributions ($2,900) are higher than your federal income tax. Under $30,000, don't look only at income tax: contributions can weigh more.

How much should you set aside from each payment you receive?

A simple method: estimate your annual total, turn it into a percentage of what you invoice, then transfer that percentage into a separate account each time you're paid. In the $60,000 example, that would be about 29%.

To fine-tune, look at what each extra $1,000 of net income costs you. In 2026, once you're past your basic personal amounts and up to $54,345 of taxable income:

These amounts ignore the deduction for contributions, so they're slightly cautious. Above $54,345, the Quebec rate rises to 19%, and the share you set aside needs to go up.

Do you have to pay instalments?

Instalment payments are partial payments you make during the year. They spare you from paying everything at once in the spring. In Quebec, they cover income tax and, if applicable, your contributions to the QPP, the QPIP, the Health Services Fund and the prescription drug insurance plan.

In Quebec, instalments are required if both of these conditions are met:

• your estimated net tax for the year is over $1,800;
• your net tax owing was over $1,800 for either of the two previous years.

Net tax owing is the year's tax, minus tax already withheld at source and your refundable tax credits.

Federally, a Quebec resident follows a similar rule: instalments are required if their net tax owing is over $1,800 in 2026, and was also over $1,800 in 2025 or 2024. Elsewhere in Canada, the threshold is $3,000. The CRA sends reminders in February, for the March and June payments, and in August, for the September and December payments.

With no salary, nothing is withheld at source: your net tax quickly goes over $1,800. In the fictional $50,000 example, the estimated federal income tax ($3,922) is already above that threshold.

First year working for yourself? The rule also looks at previous years. If your net tax owing wasn't over $1,800 in either of the two previous years, instalments aren't required that year. The balance will then be paid in full in the spring: set it aside anyway.

When do you file your return and pay the balance?

In Quebec, if you run a business, you have until June 15 to file your income tax return. But any balance owing must be paid no later than April 30. After that date, Revenu Québec charges interest on the unpaid balance. A date that falls on a Saturday or Sunday moves to the next business day.

Can't pay it all? File your return on time anyway: you avoid the late-filing penalty.

Federally, check the CRA's dates for the year in question.

What to do

1. Right now. Open a separate savings account, just for income tax and contributions.
2. Each time you're paid. Transfer your percentage into it, calculated on the amount before taxes.
3. Every month. Keep your books up to date: income, expenses, supporting documents. That's the basis of any reliable estimate.
4. Mid-year. Redo the calculation with your actual figures and adjust your percentage.
5. In February and August. Read the CRA's instalment reminders, if any, and make your Quebec payments if you're required to.
6. No later than April 30. Pay the previous year's balance.
7. No later than June 15. File your Quebec return, and your federal return according to the CRA's dates.
8. All year. Keep your invoices and receipts. Revenu Québec generally has three years after the notice of assessment to review a return.