Marginal Tax Rate
The marginal tax rate is the rate of tax applied to your last (or next) dollar of income. In Canada's progressive tax system, income is taxed in brackets — each bracket's rate applies only to income within that range. For 2025, federal rates are: 15% (up to $57,375), 20.5% ($57,375–$114,750), 26% ($114,750–$158,468), 29% ($158,468–$220,000), and 33% (over $220,000).
Your combined marginal rate includes both federal and provincial tax. Since each province has its own brackets and rates, the total marginal rate varies significantly by province. For example, at $100,000 the combined marginal rate ranges from about 30% in Alberta to over 40% in Nova Scotia and Quebec.
Understanding your marginal rate is critical for tax planning: it determines the tax savings from RRSP contributions, the cost of earning additional income, and the value of deductions. An RRSP contribution at a 40% marginal rate saves $0.40 per dollar contributed.
Related Terms
Effective Tax Rate
The effective tax rate is your total income tax paid divided by your total gross income, expressed as a percentage.
BPA (Basic Personal Amount)
The Basic Personal Amount (BPA) is a non-refundable tax credit available to every Canadian taxpayer.
Tax Deduction
A tax deduction reduces your taxable income before tax is calculated, effectively saving you money at your marginal tax rate.
RRSP (Registered Retirement Savings Plan)
An RRSP is a government-registered account where contributions are tax-deductible and investments grow tax-free until withdrawal.