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Marginal Tax Rate

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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 Canadian Income Tax & RRSP Savings Calculators always display the average tax, 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.  The marginal tax rate is also shown, on the RRSP savings line.

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 dividends eligible for the enhanced dividend tax credit
bullet138% of these dividends are included in taxable income, but an enhanced dividend tax credit is deducted from taxes payable.
bulletCanadian non-eligible dividends (aka regular dividends, or small business dividends)
bullet116% of these dividends will be included in income in 2018, and 115% in 2019 and later years, as per the 2017 Fall Economic Statement.
bullet117% of these dividends are included in income in 2016 and 2017 (as per the 2016 Federal Budget)
bullet118% of these dividends are included in income in 2014 and 2015,
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.

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

Revised: October 24, 2017

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