Plain meaning
The tax rate that applies to the next dollar of taxable income, after considering the relevant federal and provincial or territorial brackets.
Also called
marginal rate
Key points
- Canada uses graduated personal income tax rates, so higher slices of taxable income can be taxed at higher rates.
- The marginal rate is not the rate paid on all income; it applies to the next dollar in the applicable bracket.
- Credits, deductions, surtaxes, benefit clawbacks, and payroll contributions can change the practical after-tax effect of extra income.
- Marginal rates are often discussed when budgets change brackets, credits, or inclusion rates.
Why it comes up
Marginal tax rates help readers understand how a raise, RRSP deduction, capital gain, or new credit can affect after-tax income.