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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 - $55,867 | 15.00% |
| $55,868 - $111,733 | 20.50% |
| $111,734 - $173,205 | 26.00% |
| $173,206 - $246,752 | 29.32% |
| Over $246,752 | 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 $55,867 is 15%. On amounts from $55,867 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 the first $47,937 7.07% on the next $47,938 10.5% on the next $14,201 12.29% on the next $23,588 14.70% on the next $47,568 16.80% on the next $71,520 20.50% on amounts over $252,752 |
| Alberta | 10% on the first $148,269 12% on the next $29,656 13% on the next $59,308 14% on the next $118,615 15% on amounts over $355,845 |
| Saskatchewan | 10.5% on the first $52,057 12.5% on the next $96,677 14.5% on amounts over $148,736 |
| Manitoba | 10.8% on the first $47,000 12.75% on the next $53,000 17.4% on any amount over $100,000 |
| Newfoundland and Labrador | 8.7% on the first $43,918 14.5% on the next $43,197 15.8% on the next $67,849 19,8% on the next $61,699 20.8% on the next $275,869 21.3% on the next $551,739 20.5% on any amount over $1,103,478 |
| Nova Scotia | 8.79% on the first $29,590 14.95% on the next $29,590 16.67% on the next $33,820 17.5% on the next $57,000 21% on amounts over $150,000 |
| Prince Edward Island | 9.8% on the first $32,656 13,8% on the next $31,657 16.7% on the next $40,687 18% on the next $35,000 18.75% on amounts over $140,000 |
| Ontario | 5.05% on the first $51,446 9.15% on the next $51,448 11.16% on the next $47,106 12.16% on the next $70,000 13.16% on amounts over $220,000 |
| Quebec | 15% on the first $51,780 20% on the next $51,765 24% on the next $22,455 25.75% on amounts over $126,000 |
| New Brunswick | 9.68% on the first $49,958 14.82% on the next $50,318 16% on the next $85,148 19.5% on amounts over $185,064 |
| Northwest Territories | 5.9% on the first $50,597 8.6% on the next $50,601 12.2% on the next $63,327 14.05% on amounts over $164,525 |
| Yukon | 6.4% on the first $55,867 9% on the next $55,866 10.9% on the next $61,472 12.8% on the next $253,248 15% on amounts over $500,000 |
| Nunavut | 4% on the first $53,268 7% on the next $53,269 9% on the next $66,668 11.5% on amounts over $173,205 |
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 - $47,937 - 20.06% $47,937 - $55,867 - 22.7% $55,867 - $95,875 - 28% $95,875 - $110,076 - 31% $110,076 - $111, 733 - 32.79% $111,733 - $133,664 - 38,29% $133,664 - $173,205 - 40.70% $173,205 - $181,232 - 44.02% $181,232 - $246,752 - 46.12% $246,752 - $252,752 - 49.8% $252,752 and up - 53.5% |
| Alberta | $0 - $55,867 - 25% $55,867 - $111,733 - 30.5% $111,733 - $148,269 - 36% $148,269 - $173,205 - 38% $173,205 - $177,922 - 41% $177,922 - $237,230 - 42% $237,230 - $246,752 - 43% $246,752 - $355,845 - 47% Above $355,845 - 48% |
| Saskatchewan | $0 - $52,057 - 25.5% $52,057 - $55,867 - 27.5% $55,867 - $111,733 - 33% $111,733 - $148,734 - 38.5% $148,734 - $173,205 - 40.5% $173,205 - $246,752 - 43.5% $246,752 plus - 47.5% |
| Manitoba | $0 - $47,000 - 25.8% $47,000 - $55,867 - 27.75% $55,867 - $100,000 - 33.25% $100,000 - $111,733 - 37.9% $111,733 - $173,205 - 43.4% $173,205 - $246,752 - 46.4% $246,752 and up - 50.4% |
| Ontario | Up to $49,231 - 20.05% $49, 231 to $53,359 - 24.15% $53,359 to $98,463 - 29 .15% $98,463 to $106,717 - 31.21% $106,717 to $150,000 - 37.16% $150,000 to $165,430 - 38.16% $165,430 to $220,000 - 41.16% $220,000 to $235,675 - 42.16% $235,675 - 46.16% |
| Nova Scotia | $0 - $29,590 - 23.79% $29,590 - $55,867 - 29.95% $55,867 - $59,180 - 35.45% $59,180 - $93,000 - 37.17% $93,000 - $111,733 - 38% $111,733 - $150,000 - 43.5% $150,000 - $173,205 - 47% $173,205 - $246,752 - 50% $246,752 plus - 54% |
| New Brunswick | $0 - $49,958 - 24.68% $49,958 - $55,867 - 29.85% $55,867 - $100,276 - 35.3% $100,276 - $111,733 - 36.5% $111,733 - $173,205 - 42% $173,205 - $185,064 - 45.5% $185,064 - $246,752 - 48.5% $246,752 plus - 52.5% |
| Newfoundland and Labrador | $0 - $43,918 - 23.7% $43,918 - $55,867 - 29.5% $55,867 - $87,115 - 35% $87,115 - $111,733 - 36.3% $111,733 - $154,964 - 40.8% $154,964 - $173,205 - 44.8% $173,205 - $216,663 - 47.8% $216,663 - $246,752 - 49.8% $246,752 - $492,532 - 52,8% $492,532 - $1,103,478 - 54.3% |
| Quebec | $0 - $51,780 - 30% $51,780 - $55,867 - 35% $55,867 - $103,545 - 40.5% $103,545 - $111,733 - 44.5% $111,733 - $126,000 - 50% $126,000 - $173,205 - 51.75% $173,205 - $246,752 - 54.75% $246,752 plus - 58.75% |
| Prince Edward Island | $0 - $32,656 - 24.8% $32,656 - $55,867 - 28.8% $55,867 - $64,313 - 34.4% $64,313 - $105,000 - 37.20% $105,000 - $111,733 - 38.5% $111,733 - $140,000 - 44% $140,000 - $173,205 - 44.75% $173,205 - $246,752 - 47.75% $246,752 plus - 51.75% |
| Northwest Territories | $0 - 50,597 - 20.9% 50,597 - $55,867 - 23.6% $55,867 - $106,485 - 29.1% $106,485 - $111,733 - 32.7% $111,733 - $164,525 - 38.2% $164,525 - $173,205 - 40.05% $173,205 - $246,752 - 43.09% $246,752 plus - 48.09% |
| Nunavut | $0 - $53,268 - 19% $53,268 - $55,867 - 22% $55,867 - $106,535 - 27.5% $106,535 - $111,733 - 29.5% $111,733 - 173,205 - 37.5% $173,205 - $246,752 - 40.5% $246,752 plus - $44.5% |
| Yukon | $0 - $55,867 - 21,4% $55,867 - $111,733 - 29.5% $111,733 - 173,205 - 36.9% $173,205 - $246,752 - 41.8% $246,752 - $500,000 - 45.5% $500,000 and up - 47.7% |
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.
