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Canadian Marginal Tax Rates
The Canadian tax system is based on progressive tax rates, meaning that the applicable marginal tax rate increases as your taxable income increases. Therefore, a marginal tax rate represents the rate of tax that you pay on each additional dollar of income earned. Your marginal rate is a total of the federal and applicable provincial tax.
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Calculating Your Tax Liability
In order to approximately determine how much tax you will have to pay, you must first calculate what your total taxable income will be for the year.
To start, add up all your various types of income (e.g. salary, interest, grossed-up dividends), and subtract the various deductions such as your RSP contribution and deductible interest expense.
The total income less deductions represents your taxable income. Your total federal taxes payable can then be calculated by multiplying the taxable income amount by the appropriate federal tax rates, then subtracting your various tax credits (e.g. basic personal credit, dividend tax credit, etc.). A similar set of calculations has to be completed to determine the provincial taxes owing on the taxable income as well.
For taxable income up to $31,000 the marginal tax rate is approximately 26%. For taxable income between $31,000 and $62,000 the tax rate is approximately 36%. For taxable income between $62,000 and $100,000 the marginal tax rate is approximately 43.5%. Finally, for taxable income above $100,000 the marginal tax rate is approximately 46.5%.
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