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Marginal Tax Rate TaxTips.ca
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Glossary  -> Marginal Tax Rate

Marginal Tax Rate

A person's marginal tax rate is the tax rate that will be applied to the next dollar earned.  This is quite different from the average tax rate, which will be much lower.  The Detailed Canadian Income Tax & RRSP Savings Calculators displays the average tax rate, near the bottom of the calculator.  If an RRSP deduction amount is entered in the calculator, it will also display the savings from the RRSP deduction.  To determine your marginal tax rate using the calculator, put your actual RRSP deduction into "other deductions", and enter $10 in the RRSP deduction field.  The % tax savings is your marginal tax rate.

The marginal tax rates on capital gains and Canadian dividend income are lower than on other types of income, because:

bulletonly 50% of capital gains are included in taxable income - our tax rate tables show the marginal tax rate on the next dollar of the actual amount of capital gains earned.
bulletCanadian eligible dividends:
bullet138% of these dividends are included in taxable income, but a dividend tax credit is deducted from taxes payable.
bulletCanadian non-eligible dividends (aka regular dividends, or small business dividends).  The amount of these dividends included in income is:
bullet115% in 2019 and later years,
bullet116% in 2018,
bullet117% in 2016 and 2017,
bullet118% in 2014 and 2015, and
bullet125% in 2013 and earlier years.
bulleta non-eligible dividend tax credit is deducted from taxes payable.

To see the marginal tax rates for different types of income for each tax bracket, see the marginal tax rate table for your province or territory.  These tables display the marginal tax rates for a single person with only the basic personal amount tax credit.

You can also see marginal tax rates for all provinces and territories for capital gains, Canadian eligible and non-eligible dividends and other income using the very simple Basic Tax Calculator.

Tax Tip:  Use the Canadian Income Tax & RRSP Savings Calculator to help determine your own marginal tax rate.

Revised: April 27, 2021

 

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