Understanding the Tables of Personal Income Tax Rates
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Understanding the Tables of Personal Income Tax Rates

Understanding the Tables of Personal Income Tax Rates
 
 
 
Understanding the Tables of Personal Income Tax Rates
 
 
 
 
The tax rate tables show the combined federal plus provincial/territorial marginal tax rate for 4 different types of income - the 2 types of Canadian dividends, capital gains, and all other income.  The other income column shows the actual tax rates for each tax bracket.  A person's marginal tax rate is the tax rate that will be applied to the next dollar earned. The marginal tax rates on capital gains and Canadian dividend income are lower than on other types of income, because: only 50% of capital gains are included in taxable incomeeither 125% or 138% (in 2012 and later years, 141% in 2011) of  Canadian dividends are included in taxable income, but a dividend tax credit is deducted from taxes payable.  See the Dividend Tax Credit page for more information.Other income includes income from employment, self-employment, interest from Canadian or foreign sources, foreign dividend income, etc.With some marginal tax rate tables, the marginal tax rate at $60,000 for dividends is the rate that would apply if there was no income besides dividend income.  This is not the way our tax rate tables work.In our tables, the marginal tax rates for capital gains and dividends at any income level (say $60,000) are the marginal rates on the next dollar of actual capital gains or actual dividend income, if the taxpayer has $60,000 of taxable income from sources other than capital gains or dividends.Example:  the combined federal/BC marginal tax rate for a person earning $72,000 of income in 2012 would be29.7% for income such as employment, self-employment, interest or foreign dividends14.85% for capital gains6.46% for eligible Canadian dividends16.21% for Canadian small business dividendsOur Canadian Tax Calculator displays the average tax rate paid.  The average tax rate is not the same as the marginal tax rate.  The average tax rate is calculated as total taxes divided by total taxable income.  The Tax Calculator also calculates an average tax based on adjusted taxable income, which excludes the dividend gross-up (see dividend tax credit page) and includes 100% of capital gains.  In the Tax Calculator, the marginal tax rate is displayed when there is an RRSP deduction - it is the % savings from the RRSP deduction.  The marginal tax rates in the tax tables do not include tax credits that are available for CPP/QPP or EI paid,  low income tax reductions or other tax credits.  Nor do they include health or other premiums.  To determine your actual marginal tax rate, enter your income, deductions and tax credits into the tax calculator, and enter an RRSP deduction amount of $100, or $1,000.  Your marginal tax rate will be displayed beside the RRSP savings amount. Trying to estimate your taxes from the tax tables? If your income doesn't include employment income or Canadian dividends, and you have no tax credits other than the basic personal amount, you could estimate your taxes using our tax tables.  You would have to include only 50% of capital gains in your taxable income.  Here is a sample calculation for an Ontario resident with $80,000 of taxable income in 2012: Tax Calculated onTaxable
Amount
Tax
Rate
Tax First$39,020$39,02020.05%$7,824 up to42,7073,68724.15%890 up to68,71926,01231.15%8,103 up to78,0439,32432.98%3,075 up to80,0001,95735.39%693 less ON personal amount-9,4055.05%-475 less Fed personal amount-10,82215.00%-1,623 Total Fed/ON tax$18,486 
 
 

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