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Checking which Canadian marginal tax rate applies to you can help you figure out what taxes you might owe. There are provincial and territorial tax rates, too.
Your marginal tax rate is the rate of tax you pay on the next dollar of income you earn. Canada’s tax system is designed to collect more tax on higher earnings.
In 2023, for example, Canadians are paying 15% federal tax on earnings up to $53,359 and 20.5% on earnings above that amount, up to $106,717. Between $165,430 and $235,675, earnings were taxed at 29%. And over $235,675 is taxed at 33%. The higher rates do not apply to all your earnings, just the portion above the limit for the next lowest tax bracket. It’s like a ladder—each step represents an amount and a different tax rate. As you go higher, each step is taxed differently than the previous one.
Your marginal tax rate is the highest rate you pay. For example, if you earn $90,000 in 2023, your marginal tax rate would be 20.5%. You would pay 15% on the first $53,359 you earn, then 20.5% on the rest.
The federal income tax rates for Canadian tax brackets in 2023 are:
| Tax rate | Tax bracket |
| 15% | $53,359 or less |
| 20.5% | $53,359 to $106,717 |
| 26% | $106,717 to $165,430 |
| 29% | $165,430 to $235,675 |
| 33% | Over $235,675 |
Each province and territory has its own tax brackets and rates as well.
Knowing where you fit within the tax brackets helps you plan for things like contributing to your registered retirement savings plan (RRSP), first home savings account (FHSA) and tax-free savings account (TFSA), and other tax credits.
Example: “Duke spoke to his lawyer about how he might reduce the tax on his investment income. By moving the investments into a family trust for the benefit of his grandson, the income would be taxed at 15%, his grandson’s marginal tax rate, instead of Duke’s marginal tax rate of 33%.”
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