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Understanding the Tables of Personal Income Tax Rates
The tax rate tables show the combined federal
plus provincial/territorial marginal
tax rate for 4 different types of income - the 2 types of Canadian
dividends, capital gains, and all other income. The
other income column shows the actual tax rates for each tax bracket.
A person's marginal tax rate is the
tax rate that will be applied to the next dollar earned.
The marginal tax rates on
capital gains and Canadian dividend income are
lower than on other types of income, because:
Other income includes
income from employment, self-employment, interest
from Canadian or foreign sources, foreign dividend
income, etc.
With some marginal tax rate tables, the marginal tax rate at
$60,000 for dividends is the rate that would apply if there was no income
besides dividend income. This is not
the way our tax rate tables work.
In our tables, the marginal tax rates for capital gains and dividends at any
income level (say $60,000) are the marginal rates on the next dollar of actual
capital gains or actual dividend income, if the taxpayer has $60,000 of taxable
income from sources other than dividends.
Example: the combined federal/BC marginal tax
rate for a person earning $72,000 of employment income in 2009 would be
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32.5% for employment income |
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16.25% for capital gains |
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3.68% for eligible Canadian dividends |
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18.71% for Canadian small business
dividends |
Our Canadian Tax
Calculator displays the average tax rate paid. The average tax rate is not the same as the marginal
tax rate. The average tax rate is calculated as total taxes divided by
total taxable income. The Tax Calculator also calculates an
average tax based on adjusted taxable income, which excludes the
dividend gross-up (see dividend tax credit page)
and includes 100% of capital gains. In
the Tax Calculator, the marginal tax rate is displayed when there is an RRSP
deduction - it is the % savings from the RRSP deduction. The marginal tax
rates in the tax tables do not include any low income tax reductions or other
tax credits. Nor do they include health or other premiums. To
determine your actual marginal tax rate, enter your income, deductions and tax
credits into the tax calculator, and enter an RRSP deduction amount of $100,
or $1,000. Your marginal tax rate will be displayed beside the RRSP
savings amount.
Revised: January 28, 2010
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