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Understanding the Tables of Personal Income Tax Rates
In Canada, as taxable income increases, the tax rate increases as well. There are 5 different tax brackets federally, and each province has their own tax brackets. Your income in the first tax bracket is taxed at the lowest rate, in the second tax bracket is taxed at the next higher rate, etc. See the example near the bottom of the page.
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 amounts. The 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:
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:
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.
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.
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):
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: September 14, 2022
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