Financial planners often use the term “marginal tax rate.” What is that and why is it important?
Your marginal tax rate is the rate at which you are taxed on your next dollar of income. It depends partly on your taxable income, partly on the non-refundable tax credits you can claim, and partly on your province of residence at the end of the year. The federal tax system has four different tax rates. For 2005, your first $35,595 of taxable income is taxed at 15%. Your next $35,595 of taxable income is taxed at 22%. Taxable income between $71,190 and $115,739 is taxed at 26% and taxable income in excess of $115,739 is taxed at 29%. With the exception of Alberta, which has a single rate of 10%, the provinces also have progressively increasing tax rates depending on your income level. So if you are wondering how much extra tax you will have to pay if you make an RRSP withdrawal, do some moonlighting, or realize a capital gain on the sale of some shares, you need to know your marginal tax rate.
Your marginal tax rate is the rate at which you are taxed on your next dollar of income. It depends partly on your taxable income, partly on the non-refundable tax credits you can claim, and partly on your province of residence at the end of the year. The federal tax system now has four different tax rates. For 2001, your first $30,754 of taxable income is taxed at 16%. Your next $30,754 of taxable income is taxed at 22%. Taxable income between $61,509 and $100,000 is taxed at 26% and taxable income in excess of $100,000 is taxed at 29%. With the exception of Alberta, which has a single rate of 10%, the provinces also have progressively increasing tax rates depending on your income level. So if you are wondering how much extra tax you will have to pay if you make an RRSP withdrawal, do some moonlighting or realize a capital gain on the sale of some shares, you need to know your marginal tax rate.
Your marginal tax rate is the rate at which you are taxed on your next dollar of income. It depends partly on your taxable income, partly on the non-refundable tax credits you can claim, and partly on your province of residence at the end of the year. The federal tax system has four different tax rates. For 2005, your first $35,595 of taxable income is taxed at 15%. Your next $35,595 of taxable income is taxed at 22%. Taxable income between $71,190 and $115,739 is taxed at 26% and taxable income in excess of $115,739 is taxed at 29%. With the exception of Alberta, which has a single rate of 10%, the provinces also have progressively increasing tax rates depending on your income level. So if you are wondering how much extra tax you will have to pay if you make an RRSP withdrawal, do some moonlighting, or realise a capital gain on the sale of some shares, you need to know your marginal tax rate.
