Ive heard the term “marginal tax rate” referred to by financial planners. What does it mean?
Marginal tax rate is the rate at which you are taxed on your next dollar of income. Factors such as your taxable income, the amount of non-refundable tax credits you can claim and province of residence at the end of the year all contribute to the marginal tax rate. In Canada, the federal tax system has four tax rates. For 2009, the first $38,832 of taxable income is taxed at 15%. The next $38,832 of taxable income is taxed at 22%. Taxable income between $77,664 and $126,264 is taxed at 26% and taxable income over $126,264 is taxed at 29%.
