Taxes & Accounts

Tax Brackets

Canada uses marginal tax brackets, meaning different portions of taxable income are taxed at different rates.

4 min

Taxes 101 • 03

A higher tax bracket does not apply its rate to all your income.

Each rate applies only to the portion of taxable income inside that bracket.

That is what marginal taxation means.

As taxable income moves through brackets, only the next portion faces the next rate.

Your total income tax can reflect

01Federal brackets02Provincial or territorial brackets03Taxable income04Credits and other tax rules05Your province or territory of residence for tax purposes

Marginal rate and average rate are different.

01

Marginal rate

The rate that applies to the next dollar within your current bracket.

02

Average rate

Total tax divided by the amount of income being compared.

A toy example shows the idea.

First $50,000Example 10%
Next $20,000Example 20%
Income$70,000
Wrong idea20% on all $70,000

The actual federal and provincial brackets change over time.

Use current CRA and provincial information when you need real tax rates.

The key questions are

01What is taxable income?02Which bracket contains each portion?03What federal rates apply?04What provincial or territorial rates apply?

Remember this

Moving into a higher bracket does not make earlier income jump to the new rate.

Only the portion inside the higher bracket gets that bracket’s rate.

Lesson complete

Reviewed 2026-08-18

Sources

Canada Revenue AgencyCurrent year tax rates and income brackets ↗Canada Revenue AgencyTax rates and income brackets ↗
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