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You’ll notice that when you get your marginal tax rate and average tax rate, they are unique to you. This is because everyone's annual income is different. It’s also because Canada has a progressive tax system, meaning the more you make, the more tax you pay. This means that the taxes the Canadian government collects from each individual are tailored to their income.
How Marginal Tax Rates Work
In Canada, there are marginal tax rates that are based on annual taxable income. These rates are put into place for each additional dollar of income above the previous Canadian tax brackets up until your last dollar of income. You start with the basic tax rate for income up to $55,867, and every amount above that is subject to an increased marginal rate. In total, there are seven tax brackets.
As your income increases, you could end up paying more than one marginal rate. However, if your income falls, you’ll only reduce your tax rate if you fall under the marginal rate with your total income. Otherwise, the same marginal tax rate applies.
Let’s take a look at those different rates from the Canadian government, including the lowest tax brackets and the highest tax brackets.
| Taxable Income Amounts | Federal Marginal Tax Rates |
| $0 - $58,523 | 14% |
| $58,523 - $117,045 | 20.50% |
| $117,045- $181,440 | 26.00% |
| $181,440 - $258,482 | 29.32% |
| Over $258,482 | 33% |
It’s important to understand with these marginal rates that you don’t pay the higher tax bracket amount for all of your income, just on the amount for the new marginal tax rate. Let’s take a look at how this would work based on your annual income.
For example, if your entire income is $80,000, the effective tax rate on the first $58,523 is 14%. On amounts from $58,523 to $80,000, then you pay the marginal rate of 20.50%. This is the same process that works for all income amounts.
Average Tax Rates and How They Work
Average tax rates for Canadians are different from marginal rates. Your average tax rate measures the total amount of tax divided by the total taxable income. This number is then the percentage of tax you paid for the year, which is your average tax rate.
It’s important to remember that the average tax rate isn’t just based on your annual working income. It also includes any additional income you’ve earned for the year. This means that withholding taxes, capital gains taxes, and dividend taxes are included in this average tax rate.
Tax Rate Formulas
When you’re calculating marginal and average tax rates, there are formulas you can use to find this. That said, in order to calculate, you’re going to know what the taxpayer's taxable income is. You’ll also need to know what taxes were paid on the annual income.
Marginal Rate Formulas
When it comes to calculating a taxpayer's marginal rate, there’s no specific formula. However, you are able to calculate it based on the total annual income. From there, you can determine which marginal tax rates will have to be paid and calculate the actual tax burden for each rate.
Average Rate Formulas
Calculating a taxpayer's average tax rate is actually very simple. Essentially, you take the taxes paid for the year and divide them by the total income earned for the year. The number you get is the percentage of income that is paid in taxes. Here’s an example.
Let’s say your total income was $60,000, and your total taxes paid was $15,000. In this case, your average tax rate is 25%.
Provincial Tax Rates
Above, we’ve shown you the marginal federal tax rate. That said, these are the federal tax brackets implemented by the federal government and are a part of the federal income tax system. On top of that, you also need to pay a provincial tax rate. Let’s take a look at those.
Marginal Rates
In Canada, on top of your federal taxes, you also have to pay provincial and territorial taxes. These income taxes are based on your income as well. However, the margins are different based on the province that you live in. Here are the current provincial and territorial tax brackets.
| Provinces/Territories | Tax Rates |
| British Columbia | 5.06% on amounts from $0 - $50,363 7.7% on $50,363- $100,728 10.5% on $100,728 - $115,648 12.29% on $115,648- $140,430 14.7% on $140,430 - $190,405 16.8% on $190,405 - $265,545 20.5% on $265,545 and ove |
| Alberta | 8% on the first $61,200 10% over $61,200 up to $154,259 12% over $154,259 up to $185,111 13% over $185,111 up to $246,813 14% over $246,813 up to $370,220 15% over $370,220 |
| Saskatchewan | 10.5% first $54,532 12.5% over $54,532 up to $155,805 14.5% over $155,805 |
| Manitoba | 10.8% first $47,000 12.75% over $47,000 up to $100,000 17.4% over $100,000 |
| Newfoundland and Labrador | 8.7% first $44,678 14.5% over $44,678 up to $89,354 15.8% over $89,354 up to $159,528 17.8% over $159,528 up to $223,340 19.8% over $223,340 up to $285,319 20.8% over $285,319 up to $570,638 21.3% over $570,638 up to $1,141,27 21.8% over $1,141,275 |
| Nova Scotia | 8.79% on the first $30,995 14.95% over $30,995 up to $61,991 16.67% over $61,991 up to $97,417 17.5% over $97,417 up to $157,124 21% over $157,124 |
| Prince Edward Island | 9.5%% on the first $33,928 13.47% over $33,928 up to $65,820 16.60% over $65,820 up to $106,890 17.62% over $106,890 up to $142,250 19% over $142,250 |
| Ontario | 5.05% on the first $53,891 9.15% over $53,891 up to $107,785 11.16% over $107,785 up to $150,000 12.16% over $150,000 up to $220,000 13.16% over $220,000 |
| Quebec | 14% on the first $54,345 19% over $54,345 up to $108,680 24% over $54,345 up to $108,680 25.75% on amounts over $132,245 |
| New Brunswick | 9.4% on the first $52,333 14.0% over $52,333 up to $104,666 16% over $104,666 up to $193,861 19.5% on amounts over $193,861 |
| Northwest Territories | 5.9% on the first $53,003 8.6% over $53,003 up to $106,009 12.2% over $106,009 up to $172,346 14.05% on amounts over $172,346 |
| Yukon | 6.4% on the first $58,523 9% over $58,523 up to $117,045 10.9% over $117,045 up to $181,440 12.93% over $181,440 up to $258,482 12.80% over $258,482 up to $500,000 15% on amounts over $500,000 |
| Nunavut | 4% on the first $55,801 7% over $55,801 up to $111,602 9% over $111,602 up to $181,439 11.5% on amounts over $181,439 |
Combined Provincial and Marginal Rates
Now that we know both the provincial and federal tax rates, you’ll see that the different margins aren’t the same for each province. This means that each province has different combined rates. Let’s take a look at those combined federal and provincial tax rates.
| Provinces/Territories | Combined Tax Rates |
| British Columbia | $0 - $$50,363 - 19.06% $50,363 - $58,523 - 21.7% $58,523 - $100,728 - 28.2% $100,728 - $115,648 - 31% $115,648 - $117,045 - 32.79% $117,045 - $140,430- 38,29% $140,430 - $181,440 - 40.70% $181,440- $190,405 - 43.99% $190,405 - $258,482 - 46.09% $258,482 - $265,545- 49.8% $265,545 and up - 53.5% |
| Alberta | first $58,523 -22.00% over $58,523 up to $61,200 -28.50% over $61,200 up to $117,045 -30.50% over $117,045 up to $154,259 -36.00% over $154,259 up to $181,440 -38.00% over $181,440 up to $185,111 -41.29% over $185,111 up to $246,813 -42.29% over $246,813 up to $258,482 -43.29% over $258,482 up to $370,220 -47.00% over $370,220 -48.00% |
| Saskatchewan | first $54,532 -24.50% over $54,532 up to $58,523 -26.50% over $58,523 up to $117,045 -33.00% over $117,045 up to $155,805 -38.50% over $155,805 up to $181,440 -40.50% over $181,440 up to $258,482 -43.79% over $258,482 -47.50% |
| Manitoba | first $47,000 -24.80% over $47,000 up to $58,523 -26.75% over $58,523 up to $100,000 -33.25% over $100,000 up to $117,045 -37.90% over $117,045 up to $181,440 -43.40% over $181,440 up to $200,000 -46.69% over $200,000 up to $258,482 -47.54% over $258,482 up to $400,000 -51.25% over $400,000 -50.40% |
| Ontario | first $53,891-19.05% over $53,891 up to $58,523 -23.15% over $58,523 up to $94,907 -29.65% over $94,907 up to $107,785 -31.48% over $107,785 up to $111,814 -33.89% over $111,814 up to $117,045 -37.91% over $117,045 up to $150,000 -43.41% over $150,000 up to $181,440 -44.97% over $181,440 up to $220,000 -48.26% over $220,000 up to $258,482 -49.82% over $258,482 -53.53% |
| Nova Scotia | first $30,995 -22.79% over $30,995 up to $58,523 -28.95% over $58,523 up to $61,991 -35.45% over $61,991 up to $97,417 -37.17% over $97,417 up to $117,045 -38.00% over $117,045 up to $157,124 -43.50% over $157,124 up to $181,440 -47.00% over $181,440 up to $258,482 -50.29% over $258,482 -54.00% |
| New Brunswick | first $52,333 -23.40% over $52,333 up to $58,523 -28.00% over $58,523 up to $104,666 -34.50% over $104,666 up to $117,045 -36.50% over $117,045 up to $181,440 -42.00% over $181,440 up to $193,861 -45.29% over $193,861 up to $258,482 -48.79% over $258,482 -52.50% |
| Newfoundland and Labrador | first $44,678 -22.70% over $44,678 up to $58,523 -28.50% over $58,523 up to $89,354 -35.00% over $89,354 up to $117,045 -36.30% over $117,045 up to $159,528 -41.80% over $159,528 up to $181,440 -43.80% over $181,440 up to $223,340- 47.09% over $223,340 up to $258,482 -49.09% over $258,482 up to $285,319 -52.80% over $285,319 up to $570,638 -53.80% over $570,638 up to $1,141,275 -54.30% over $1,141,275 -54.80% |
| Quebec | first $54,345 -25.69% over $54,345 up to $58,523 -30.69% over $58,523 up to $108,680 -36.12% over $108,680 up to $117,045 -41.12% over $117,045 up to $132,245 -45.71% over $132,245 up to $181,440 -47.46% over $181,440 up to $258,482 -50.21% over $258,482 -53.31% |
| Prince Edward Island | first $33,928 -23.50% over $33,928 up to $58,523 -27.47% over $58,523 up to $65,820 -33.97% over $65,820 up to $106,890 -37.10% over $106,890 up to $117,045 -38.12% over $117,045 up to $142,250 -43.62% over $142,250 up to $181,440 -45.00% over $181,440 up to $258,482 -48.29% over $258,482 -52.00% |
| Northwest Territories | first $53,003 -19.90% over $53,003 up to $58,523 -22.60% over $58,523 up to $106,009 -29.10% over $106,009 up to $117,045 -32.70% over $117,045 up to $172,346 -38.20% over $172,346 up to $181,440 -40.05% over $181,440 up to $258,482 -43.34% over $258,482 -47.05% |
| Nunavut | first $55,801 -18.00% over $55,801 up to $58,523 -21.00% over $58,523 up to $111,602 -27.50% over $111,602 up to $117,045 -29.50% over $117,045 up to $181,439 -35.00% over $181,439 up to $258,482 -40.79% over $258,482 -44.50% |
| Yukon | first $58,523 -20.40% over $58,523 up to $117,045 -29.50% over $117,045 up to $181,440 -36.90% over $181,440 up to $258,482 -42.22% over $258,482 up to $500,000 -45.80% over $500,000 - 48.00% |
Saving on Taxes
When you file your annual income taxes for the tax year, you’ll get a total of your gross income as well as your net income. Your net income is your total income after you pay taxes. If you're employed, you’ve already paid these taxes, but that doesn’t mean that you can’t save more tax and reduce your tax liability.
Whether you do your own income taxes or have them done by a tax professional, there are tax credits as well as tax dedications you can claim. These tax credits reduce your tax paid and increase your tax savings. Since you’ve most likely already paid the tax, though, you’ll receive a tax refund.
Final Thoughts
When it comes to how much tax you pay, it’s important to keep in mind that the amount will change based on where you live as well as your personal finance situation. Your federal marginal tax rate through the Canada Revenue Agency will stay the same, but the provincial rates will change. Once you know these rates and your annual income, you’ll be able to calculate your marginal tax rate as well as your average tax rate.
