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Understanding Tax Rate Tables TaxTips.ca
Canadian Tax and
Financial Information

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Tax Rates -> Understanding the Tax Rate Tables

Understanding the Tables of Personal Income Tax Rates

Our tables of marginal personal income tax rates 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, but does apply the effects of the federal, Yukon, and Nova Scotia enhancements to the basic personal amountsThe marginal tax rate as indicated in the table is the tax rate that will be applied to the next dollar earned, if there are no tax credits other than the basic personal amount, and there is no age amount clawback or Old Age Security pension clawback.

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

bullet only 50% of capital gains are included in taxable income - the marginal tax rate shows the rate on the actual amount of capital gains.
bullet Canadian dividends eligible for the dividend tax credit - 138% of these dividends are included in taxable income for 2012 and later years, but a dividend tax credit for eligible dividends is deducted from taxes payable.
bullet Canadian non-eligible dividends (aka regular dividends, or small business dividends) - 115% of these dividends are included in income in 2019 and later years.  A non-eligible dividend tax credit is deducted from taxes payable.

See the Dividend Tax Credit page for more information.

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, for example $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 capital gains or Canadian dividends.  Thus, the negative marginal tax rates for eligible dividends for lower tax brackets are the rates that would apply to the next dollar of actual dividend income received.  However, the dividend tax credit is not refundable.

Example:  the combined federal/Ontario marginal tax rate for a person who has $72,000 of "other income" in 2020 would be, for the next dollar earned:

bullet 29.65% for income such as employment, self-employment, interest or foreign dividends
bullet14.83% for capital gains
bullet6.39% for eligible Canadian dividends
bullet20.28% for Canadian non-eligible dividends

Note that the marginal tax rates in the tables only apply when there are no tax credits that would distort the rate.  If your marginal tax rate as shown in the Detailed Canadian Tax and RRSP Savings Calculator is not what you expected, read the information below.

Marginal Tax Rate vs Average (Effective) Tax Rate

Our Detailed Canadian Tax and RRSP Savings Calculator displays an average tax rate 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 can also be shown, based on the RRSP savings line.  The marginal tax rates in the tax tables do not include low income tax reductions that are reduced as income increases, or other tax credits.  Nor do they include health or other premiums, or the Newfoundland & Labrador deficit reduction levy which can add 10% to the marginal tax rate at various levels of taxable income over $50,000.  2019 will be the last year for this levy, unless legislation is tabled to extend it.

To determine your actual marginal tax rate, enter your income, deductions and tax credits into the tax 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.

Trying to Estimate Your Tax From the Tax Tables?

If your income doesn't include employment income or Canadian dividends, and you have no tax credits other than the basic personal amount, you could estimate your taxes using our tax tables.  You would have to include only 50% of capital gains in your taxable income.  Here is a sample calculation for an Ontario resident with $75,000 of taxable income in 2020 (not enough to trigger surtax):

Tax Calculated on Taxable
Amount
Tax
Rate
Tax
First $44,740 $44,740 20.05% $8,970.37
up to 48,535 3,795 24.15% 916.49
up to 75,000 26,465 29.65% 7,846.87
less ON personal amount -10,783 5.05% -544.54
less Fed personal amount -13,229 15.00% -1,984.35
Total Fed/ON tax $15,204.84

The income tax on employment income would be less, because there would be tax credits for EI premiums and CPP contributions.  At lower levels of taxable income from employment, there would also be a deduction for the Canada Workers Benefit (CWB).

For Quebec taxpayers, the calculation would have to include an adjustment to the federal personal amount, because the 16.5% federal tax abatement (reduction) is applied to the net federal tax payable after deducting the personal amount tax credit.  Thus, the federal personal amount tax credit would be reduced by 16.5%, or $292.

TaxTip:  Use our Tax Calculators to estimate your taxes!

Revised: October 04, 2021

 

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